<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended DECEMBER 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11618
HPSC, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2560004
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 720-3600
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Securities registered pursuant to section 12 (b) of the Act:
NONE
Securities registered pursuant to section 12 (g) of the Act:
COMMON STOCK-PAR VALUE $.01 PER SHARE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any other
amendment to this Form 10-K.
YES X NO
--- ---
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $16,394,325 at February 28, 1995, representing 3,544,719 shares.
The number of shares of common stock, par value $.01 per share, outstanding as
February 28, 1995 was 5,574,712.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
December 31, 1994 (the "1994 Annual Report") are incorporated by reference into
Parts I, II and IV of this annual report on Form 10-K. Portions of the Proxy
Statement of the Registrant to be filed on or about March 28, 1995 are
incorporated by reference in Part III of this report on Form 10-K.
The 1994 Annual Report and Proxy Statement, except for the parts therein
which have been specifically incorporated by reference, shall not be deemed
"filed" as part of this report on Form 10-K.
2
<PAGE>
PART I
Item 1. BUSINESS
GENERAL
HPSC, Inc. (the "Company" or "HPSC") is a financial services company
dedicated to providing financing for healthcare professionals. HPSC formerly
provided financing exclusively to the dental profession, but in mid-1993 it
began to expand into other healthcare markets and through its wholly-owned
subsidiary, American Commercial Finance Corporation ("ACFC"), into asset based
lending which focuses primarily on accounts receivable and inventory financing.
The Company's new business volume in 1994 increased substantially compared
to 1993 - $32,609,000 versus $16,402,000. In 1993, Healthco International,
Inc. (Healthco), the dental equipment supplier which previously supplied the
Company with substantially all of its business, filed for bankruptcy. The
bankruptcy of Healthco initially posed several significant challenges to the
Company. Management has worked to replace its lost business while at the same
time pursuing its plan to diversify into other markets. Within the dental
industry the Company continues its efforts to expand its business by
capitalizing on its reputation for providing a high level of customer service
and innovative and competitive financing programs. Today the Company provides
financing for over 100 different dental distributors and healthcare providers.
While certain of these vendors provide a substantial amount of business for the
Company, the Company is no longer dependent on any single source for its
business. The Company is now also providing financing to the ophthalmic,
podiatry, veterinary and chiropractic professions.
The Company finances dental, medical and other healthcare equipment as well
as leasehold improvements, office furniture, supplies and certain other costs
involved in opening, maintaining or acquiring a healthcare facility or practice.
The Company finances transactions only after a customer's credit has been
approved and a financing agreement has been executed. The Company does not
maintain any inventory. Typically, the manufacturer or distributor delivers the
equipment directly to the customer, and the Company purchases the equipment from
the supplier, at its customary selling price to the customer, upon installation
and customer acceptance.
Substantially all of the Company's agreements with its customers are
non-cancelable and provide for a full payout at a fixed financing rate with a
fixed payment schedule. The majority of the agreements have a term of between
three and seven years. All leases are classified as direct financing leases.
The Company's principal sources of funding include fixed rate borrowings of
varying maturities and a revolving line of credit at variable rates (see Note B
of Notes to Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition - Liquidity and Capital Resources" in the 1994
Annual Report). The Company's income depends, to a significant extent, upon its
ability to maintain a satisfactory spread between its cost of borrowings and the
rates that it charges its customers. In a rising interest rate environment,
the Company's use of variable rate financing could adversely affect its ability
to maintain these margins. Competitive pressures and other market conditions
could hinder the Company's ability to raise the rates charged to is customers
as quickly as its variable rate financing costs were rising.
As of November 1, 1994, the Company entered into a Purchase and Sale
Agreement with certain secured creditors of Healthco ("Secured Creditors")
pursuant to which the Company and certain individual investors agreed to acquire
the 1,949,182 shares of the Company's stock owned by Healthco which it had
pledged to the Secured Creditors and to resolve all claims between the Company
and the Secured Creditors relating to the Healthco bankruptcy. The total
consideration to be paid under the Purchase and Sale Agreement was $9 million,
$4.5 million to be paid at closing and $4.5 million to be in the form of a 6
month promissory note, collateralized by the shares of HPSC Common Stock
purchased by the Company. On December 30, 1994, the Company and the Secured
Creditors closed the transaction provided for in the Purchase and Sale
Agreement. The Company acquired 1,225,182 shares of its stock, subject to the
pledge of those shares to the Secured Creditors. Individual investors acquired
the remaining 724,000 shares. Mutual releases of claims were exchanged at the
closing, provided that the release of the Secured Creditor claims against HPSC,
if any, is contingent upon the Company's repayment in full of the note.
3
<PAGE>
Item 1. BUSINESS (continued)
SEGMENT
The Company is principally engaged in providing financing to healthcare
professionals.
MARKETING AND SOURCES OF SUPPLY
The Company obtains its customers principally from equipment vendor
referral programs and directly from end-users to whom the Company has mailed
literature, who have learned of the Company's services through advertising or
who are current customers. The vendor referral programs permit the Company to
utilize vendors' sales personnel operating from retail distribution centers
throughout the United States to generate business for the Company. The Company
also sends representatives to major trade conventions.
The Company advertises its services through industry publications, its own
marketing brochures which it distributes and also through direct mail
advertising. Existing customers and referrals from existing customers of the
Company are also important sources of business.
LEASES AND NOTES RECEIVABLE
At December 31, 1994 the Company's lease, note receivable and asset based
lending portfolio of $103,531,000 consisted of approximately 8,000 accounts and
6,000 customers with an average remaining term of 26 months. Lease and note
terms ranged from 12-60 months, with the majority having a 36- or 60-month term.
No single customer accounted for more than 1.0% of the Company's total
receivables at December 31, 1994.
FINANCING TERMS AND CONDITIONS
The Company generally finances equipment to customers through standard
non-cancelable full payout leases or conditional sales agreements or notes.
Following execution of an agreement, the equipment is delivered from either a
distributor or a manufacturer directly to the customer. Following installation
and customer acceptance of the equipment, the Company purchases the equipment
from the supplier. The Company is the owner of the leased equipment and holds a
security interest in equipment financed with conditional sales agreements or
notes.
The Company makes no warranties to customers as to any matter, including
the condition, performance or suitability of the equipment. In substantially all
cases, customers are obligated to remit to the Company all amounts due
regardless of the performance of the equipment, to maintain and service the
equipment and to insure the equipment against casualty loss.
The Company establishes residual values when the equipment is
purchased and leased. Substantially all the Company's direct financing leases
include a lease purchase option. Historically, because substantially all
lessees have exercised this option at the recorded value, the Company generally
does not incur gains/losses from the sale or releasing of equipment. The
Company recognized no excess of recorded residuals in 1994.
4
<PAGE>
Item 1. BUSINESS (continued)
CREDIT REVIEW AND LOSS EXPERIENCE
The Company conducts a credit review of each prospective customer, using
both commercial credit bureaus and its own internal credit procedures. The
Company's seven-person collection department is responsible for monitoring slow
paying accounts and collection activities when the Company determines such
action to be appropriate. Slow paying accounts are subject to service charges.
An analysis of changes in the allowance for uncollectible accounts and other
pertinent information follows (in thousands):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Gross Write Offs
Leases and (Net of Provision Delinquent Allowance
Notes Recoveries) for Losses Installments for Losses
Receivable
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $103,531 $3,056(1) $754 $3,496 4,595
--------------------------------------------------------------------------------
December 25, 1993 126,369 17,423 15,104 4,805 6,897
--------------------------------------------------------------------------------
December 26, 1992 184,928 6,128 4,307 9,917 9,216
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<FN>
(1) Approximately $1,166,000 of this 1994 amount relates to Credident, Inc.,
the Company's Canadian subsidiary. The Company sold substantially all of
the assets of Credident to a third party in June, 1994. (See Note A of the
"Notes to Consolidated Financial Statements" in the 1994 Annual Report.)
For discussion of provision for losses and allowance for losses, see
"Management's Discussion and Analysis of Financial Condition - Results of
Operations,Fiscal 1994 Compared to 1993 and Fiscal 1993 Compared to 1992"
in the 1994 Annual Report.
</TABLE>
FUNDING
At December 31, 1994 the Company had financing from a fixed rate
securitization and a variable rate revolving line of credit. See Note B of the
"Notes to Consolidated Financial Statements" and "Management's Discussion and
Analysis of Financial Condition - Liquidity and Capital Resources" in the 1994
Annual Report.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
The Company does not have any material patents, trademarks, licenses,
franchises or concessions.
SEASONALITY
The Company's business is not seasonal; however, healthcare professionals
generally tend to purchase more equipment in the fourth quarter, which may
result in more business for the Company in that quarter.
WORKING CAPITAL
The Company does not carry inventory or provide rights of return to its
customers. Its working capital requirements relate directly to its volume of
financing transactions (see "Business - Funding" and "Management's Discussion
and Analysis of Financial Condition - Liquidity and Capital Resources" in the
1994 Annual Report).
5
<PAGE>
Item 1. BUSINESS (continued)
MATERIAL CUSTOMERS
No customer or group of related customers accounted for 1.0% or more of
fiscal 1994 revenues.
RAW MATERIALS
The Company's business does not depend on raw materials.
BACKLOG
At December 31, 1994, the Company had a backlog of approximately
$25,000,000, consisting of customer applications which have been approved but
have not yet resulted in a completed transaction, compared to $6,400,000 at the
end of 1993. Not all approved applications will result in financing
transactions for the Company.
GOVERNMENT CONTRACTS OR SUB-CONTRACTS
The Company does not have a material amount of government contracts or
sub-contracts.
COMPETITION
The equipment financing business is highly competitive. Participants in the
industry compete through vendor/customer service, product innovation, and price.
Pricing is affected by each participant's ability to control origination and
funding costs, portfolio risk management and operating overhead costs. The
Company's ability to compete effectively in this market depends upon: (i) its
ability to procure financing on attractive terms; (ii) its knowledge of and
experience in its markets; (iii) its flexibility and adaptability in dealing
with the special needs of its client; (iv) its relationships with equipment
vendors; (v) its ability to continue to expand its business into areas other
than the dental profession and (vi) its ability to manage its portfolio
effectively.
The Company competes with finance divisions, affiliates and subsidiaries of
equipment manufacturers, other leasing and finance companies, certain banks
engaged in leasing and lease brokers. Many of these organizations are much
larger than the Company, have greater financial or other resources than the
Company and have access to funds at more favorable rates and terms than those
available to the Company.
RESEARCH AND DEVELOPMENT
The Company does not have research and development activities.
ENVIRONMENTAL PROTECTION
The Company's compliance with laws and regulations relating to the
protection of the environment will not have a material effect on its capital
expenditures, earnings or competitive position.
EMPLOYEES
At December 31, 1994, the Company and its subsidiaries had 44 full-time
employees, including 27 in general and administration and 17 in sales and
marketing.
6
<PAGE>
Item 1. BUSINESS (continued)
FOREIGN OPERATIONS
The Company, through its Canadian subsidiary, Credident, Inc., engaged in
the financing of dental equipment in Canada. In 1994 the Company sold
substantially all of Credident's assets to Newcourt. Credident, Inc. was in
substantially the same business as the Company, (see Note A of Notes to
Consolidated Financial Statements). The Company has ceased to underwrite any
new business in Canada. See "Management's Discussion and Analysis of Financial
Condition - Results of Operations Fiscal 1994 Compared to 1993" in the 1994
Annual Report.
EXPORT SALES
The Company does not have any export sales.
Item 2. PROPERTIES
The Company leases approximately 8,320 square feet of office space at 60
State Street, Boston, Massachusetts from Trustees of 60 State Street Trust;
approximately 2,431 square feet at 433 South Main Street, West Hartford,
Connecticut are leased by its wholly-owned subsidiary, American Commercial
Finance Corporation, and 1,520 square feet at 15455 Conway Road, Chesterfield,
Missouri by its Midwest Division. The Company also rents space as required for
its sales locations on a short-term basis. (See Note C of the "Notes to
Consolidated Financial Statements" in the 1994 Annual Report.)
Item 3. LEGAL PROCEEDINGS
The Company was not subject to any material legal proceedings at December
31, 1994.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1994.
7
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of HPSC is traded on the NASDAQ National Market System.
The high and low sales prices for the common stock as reported by NASDAQ for
each quarter in the last two fiscal years, as well as the approximate number of
record holders and information with respect to dividend restrictions, are
incorporated by reference from page 17 of the 1994 Annual Report.
Item 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31, 1994 is
incorporated by reference from page 16 of the 1994 Annual Report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition of the Company
is incorporated by reference from pages 17 through 19 of the 1994 Annual Report.
The information required by this item together with the Report of
Independent Accountants is incorporated by reference from pages 4 through 14 and
page 16 of the 1994 Annual Report. (See also the "Financial Statement Schedule"
filed under Item 14 of this Form 10-K.)
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
8
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information concerning the directors and executive officers of the
Company is incorporated by reference from the sections entitled "Nominees for
Directorship" and "Executive Officers" in the Proxy Statement of the Company to
be filed on or about March 28, 1995 (the "1995 Proxy Statement").
Item 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by reference
from the sections entitled "Executive Compensation - Summary Compensation
Table", "Executive Compensation - Option Grant Table", "Executive Compensation -
Aggregated Option Exercises and Year-End Option Value Table" and "Executive
Compensation - Employment Agreements" in the 1995 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The stock ownership of each person known to HPSC to be the beneficial owner
of more than 5% of its common stock and the stock ownership of directors and
executive officers and of all directors and executive officers as a group are
incorporated by reference from the section entitled "Voting Securities" in the
1995 Proxy Statement. See "Business-General" for information with respect to
HPSC stock formerly held by Healthco.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated by reference from the sections entitled "Executive Compensation -
Stock Loan Program" and "Certain Relationships and Related Transactions" in the
1995 Proxy Statement.
9
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page Number In
(a) 1. FINANCIAL STATEMENTS ANNUAL REPORT
Incorporated by reference from the Company's
Annual Report to Stockholders for the fiscal
year ended December 31, 1994:
Report of Independent Accountants
Consolidated Balance Sheets at December 31,
1994 and December 25, 1993 4
Consolidated Statements of Income for each
of the three years in the period ended
December 31, 1994 5
Consolidated Statements of Changes in Stock-
holders' Equity for each of the three years in
the period ended December 31, 1994 6
Consolidated Statements of Cash Flows for
each of the three years in the period ended
December 31, 1994 7
Notes to Consolidated Financial Statements 8-13
Page Number in
(a) 2. FINANCIAL STATEMENT SCHEDULES FORM 10-K
Included in Part IV of this report:
Schedule VIII - Valuation and Qualifying
Accounts for each of the three years in
the period ended December 31, 1994 21
10
<PAGE>
(a) 3. Exhibits Location of Documents Pertaining to Executive Compensation
Plans and Arrangements
Item in
Name of Document this Report Cross Reference
---------------- ----------- ---------------
1. HPSC, Inc. Stock Option 10.2 Incorporated by
Plan dated March 5, 1986 reference to Exhibit
10.6 to HPSC's Annual
Report on Form 10-K
for the fiscal year
ended December 30,
1989
2. Amended and Restated 10.3 Incorporated by
Employee Purchase Plan reference to Exhibit
effective January 5, 1987 4.3 to HPSC's
restated May 18, 1993 Quarterly Report on
Form 10-Q for the
quarter ended
September 25, 1993
3. Employment Agreement 10.4 Incorporated by
between the Company and reference to Exhibit
John W. Everets, dated 10.1 to HPSC's
July 19, 1993 Quarterly Report on
Form 10-Q for the
quarter ended
September 25, 1993
4. Employment Agreement 10.5 Incorporated by
between the Company and reference to Exhibit
Raymond R. Doherty dated 10.2 to HPSC's
as of August 2, 1993 Quarterly Report on
Form 10-Q for the
quarter ended
September 25, 1993
5. HPSC, Inc. Employee Stock 10.9 Incorporated by
Ownership Plan Agreement reference to HPSC's
dated December 22, 1993 Annual Report on Form
between HPSC, Inc. and John 10-K for the fiscal
Everets and Raymond year ended
Doherty, as trustees December 25, 1993
6. HPSC, Inc. 401 (k) Plan 10.15 Incorporated by
dated February, 1993 reference to HPSC's
between HPSC, Inc. and Annual Report on Form
Metropolitan Life Insurance 10-K for the fiscal
Company year ended
December 25, 1993
7. First Amendment effective 10.10 Incorporated by
January 1, 1993 to HPSC, reference to Exhibit
Inc. Employee Stock 10.2 to HPSC's
Ownership Plan Quarterly Report on
Form 10-Q
8. Second Amendment effective 10.11 Filed herewith.
January 1, 1994 to HPSC,
Inc., Employee Stock
Ownership Plan
9. Third Amendment effective 10.12 Filed herewith
January 1, 1993 to HPSC,
Inc. Employee Stock
Ownership Plan
10. HPSC, Inc. Supplemental 10.13 Incorporated by
Employee Stock Ownership reference to Exhibit
Plan and Trust dated 10.3 to HPSC's
July 25, 1994 Quarterly Report on
Form 10-Q for the
quarter ended June 25,
1994
11
<PAGE>
(a) 3. Exhibits Location of Documents Pertaining to Executive Compensation
Plans and Arrangements (cont'd)
Item in
Name of Document this Report Cross Reference
---------------- ----------- ---------------
11. HPSC, Inc. 1994 Stock Plan 10.14 Incorporated by
dated as of March 23, 1994 reference to Exhibit
and related forms of 10.4 to HPSC's
Nonqualified Option Grant Quarterly Report on
and Option Exercise Form Form 10-Q for the
quarter ended June 25,
1994
12. Employment Agreement 10.8 Incorporated by
between HPSC, Inc. and Rene reference to Exhibit
Lefebvre dated April 6, 10.5 to HPSC's
1994 Quarterly Report on
Form 10-Q for the
quarter ended June 25,
1994
13. Amendment dated as of May 10.6 Incorporated by
25, 1994 to Employment reference to Exhibit
Agreement between HPSC, 10.6 to HPSC's
Inc. and John W. Everets Quarterly Report on
Form 10-Q for the
quarter ended June 25,
1994
14. Amendment dated as of May 10.7 Incorporated by
25, 1994 to Employment reference to Exhibit
Agreement between HPSC, 10.7 to HPSC's
Inc. and Raymond R. Doherty Quarterly Report on
Form 10-Q for the
quarter ended June 25,
1994
12
<PAGE>
EXHIBITS
Exhibit Title Method of Filing
------- ----- ----------------
No.
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3.1 Form of Restated Certificate Incorporated by reference
of Incorporation of HPSC, Inc. to Exhibit 3.1 to HPSC's
Registration Statement on
Form S-1 filed April 27,
1983 (File No. 2-83334)
3.2 Certificate of Designation of Incorporated by reference
HPSC, Inc.'s Series A to Exhibit 3.3 to HPSC's
Preferred Stock Annual Report on Form 10-K
for the fiscal year ended
December 25, 1993
3.3 Amended and Restated By-Laws Incorporated by reference
to Exhibit 3.1 to HPSC's
Quarterly Report on Form
10-Q for the quarter ended
June 25, 1994
4.1 Rights Agreement dated as of Incorporated by reference
August 3, 1993 between the to Exhibit 4 to HPSC's
Company and The First National Amendment No. 1 to its
Bank of Boston, N.A., Current Report on Form 8-K
including as Exhibit B thereto filed August 11, 1993.
the form of Rights Certificate
10.1 Lease dated as of March 8, Filed herewith.
1994 between the Trustees of
60 State Street Trust
September 10, 1970 and
HPSC, Inc. relating to the
principal executive offices of
HPSC, Inc. at 60 State Street,
Boston, Massachusetts
10.2 HPSC, Inc. Stock Option Plan, Incorporated by reference
dated March 5, 1986 to Exhibit 10.6 to HPSC's
Annual Report on Form 10-K
for the fiscal year ended
December 30, 1989
10.3 Amended and Restated Employee Incorporated by reference
Stock Purchase Plan effective to Exhibit 4.3 to HPSC's
January 5, 1987 restated May Quarterly Report on Form
18, 1993 10-Q for the quarter ended
September 25, 1993
13
<PAGE>
EXHIBITS (CONTINUED)
Exhibit Title Method of Filing
------- ----- ----------------
No.
--
10.4 Employment Agreement between Incorporated by reference
the Company and to Exhibit 10.1 to HPSC's
John W. Everets, dated Quarterly Report on Form
July 19, 1993 10-Q for the quarter ended
September 25, 1993
10.5 Employment Agreement between Incorporated by reference
the Company and Raymond R. to Exhibit 10.2 to HPSC's
Doherty dated Quarterly Report on Form
as of August 2, 1993 10-Q for the quarter ended
September 25, 1993
10.6 Amendment dated as of May 25, Incorporated by reference
1994 to Employment Agreement to Exhibit 10.6 to HPSC's
between HPSC, Inc. and Quarterly Report on Form
John W. Everets 10-Q for the quarter ended
June 25, 1994
10.7 Amendment dated as of May 25, Incorporated by reference
1994 to Employment Agreement to Exhibit 10.7 to HPSC's
between HPSC, Inc. and Raymond Quarterly Report on Form
R. Doherty 10-Q for the quarter ended
June 25, 1994
10.8 Employment Agreement between Incorporated by reference
HPSC, Inc. and Rene Lefebvre to Exhibit 10.5 to HPSC's
dated April 6, 1994 Quarterly Report on Form
10-Q for the quarter ended
June 25, 1994
10.9 HPSC, Inc. Employee Stock Incorporated by reference
Ownership Plan Agreement dated to HPSC's Annual Report on
December 22, 1993 between Form 10-K for the fiscal
HPSC, Inc. and John W. Everets year ended December 25,
and Raymond R. Doherty, as 1993
trustees
10.10 First Amendment effective Incorporated by reference
January 1, 1993 to HPSC, Inc. to Exhibit 10.2 to HPSC's
Employee Stock Ownership Plan Quarterly Report on Form
10-Q for the quarter ended
June 25, 1994
10.11 Second Amendment effective Filed herewith
January 1, 1994 to HPSC, Inc.
Employee Stock Ownership Plan
10.12 Third Amendment effective Filed herewith
January 1, 1993 to HPSC, Inc.
Employee Stock Ownership Plan
14
<PAGE>
EXHIBITS (CONTINUED)
Exhibit Title Method of Filing
------- ----- ----------------
No.
--
10.13 HPSC, Inc. Supplemental Incorporated by reference
Employee Stock Ownership Plan to Exhibit 10.3 to HPSC's
and Trust dated July 25, 1994 Quarterly Report on Form
10-Q for the quarter ended
June 25, 1994
10.14 HPSC, Inc. 1994 Stock Plan Incorporated by reference
dated as of March 23, 1994 and to Exhibit 10.4 to HPSC's
related forms of Nonqualified Quarterly Report on Form
Option Grant and Option 10-Q for the quarter ended
Exercise Form June 25, 1994
10.15 HPSC, Inc. 401(k) Plan dated Incorporated by reference
February, 1993 between HPSC, to HPSC's Annual Report on
Inc. and Metropolitan Life Form 10-K for the fiscal
Insurance Company year ended December 25,
1993
10.16 Indenture and Service Incorporated by reference
Agreement dated as of December to HPSC's Annual Report on
23, 1993 by and among HPSC Form 10-K for the fiscal
Funding Corp. I, HPSC, Inc. year ended December 25,
and State Street Bank and 1993
Trust company of Connecticut,
N.A.
10.17 Sale and Contribution Incorporated by reference
Agreement dated as of December to HPSC's Annual Report on
23, 1993 between HPSC Funding Form 10-K for the fiscal
Corp I and HPSC, Inc. year ended December 25,
1993
10.18 Note Purchase Agreement dated Incorporated by reference
as of December 23, 1993 among to HPSC's Annual Report on
HPSC Funding Corp. I, HPSC, Form 10-K for the fiscal
Inc. and the Prudential Life year ended December 25,
Insurance Company of America 1993
10.19 Insurance Agreement dated as Incorporated by reference
of December 23, 1993 among to HPSC's Annual Report on
Municipal Bond Investors Form 10-K for the fiscal
Assurance Corporation, HPSC year ended December 25,
Funding Corp. I, HPSC, Inc. 1993
and State Street Bank and
Trust Company of Connecticut,
N.A.
10.20 Undertaking with respect to Incorporated by reference
Exhibits to certain Agreements to HPSC's Annual Report on
Form 10-K for the fiscal
year ended December 25,
1993
15
<PAGE>
EXHIBITS (CONTINUED)
Exhibit Title Method of Filing
------- ----- ----------------
No.
--
10.21 Revolving Credit Agreement Incorporated by reference
dated as of June 23, 1994 to Exhibit 10.1 to HPSC's
among HPSC, Inc., The First Quarterly Report on Form
National Bank of Boston, 10-Q for the quarter ended
individually and as agent, and June 25, 1994
Continental Bank, N.A.,
individually and as Co-agent
10.22 First Amendment, dated as of Incorporated by reference
September 2, 1994, to to Exhibit 10.1 to HPSC's
Revolving Credit Agreement Quarterly Report on Form
dated as of June 23, 1994, 10-Q for the quarter ended
among HPSC, Inc., The First September 24, 1994
National Bank of Boston,
individually and as Agent, and
Continental Bank, N.A.,
individually and as Co-Agent
10.23 Amendment and Restatement, Incorporated by reference
dated November 4, 1994, of to Exhibit 10.2 to HPSC's
First Amendment, dated as of Quarterly Report on Form
September 2, 1994, to 10-Q for the quarter ended
Revolving Credit Agreement, September 24, 1994
dated as of June 23, 1993,
among HPSC, Inc., The First
National Bank of Boston,
individually and as Agent, and
Bank of America, Illinois,
individually and as Co-Agent
10.24 Second Amendment, dated as of Filed herewith
November 8, 1994, to Revolving
Credit Agreement dated as of
June 23, 1994, among HPSC,
Inc., The First National Bank
of Boston, individually and as
Agent, and Bank of America
Illinois, individually and a
Co-Agent
10.25 Third Amendment, dated as of Filed herewith
November 22, 1994, to
Revolving Credit Agreement
dated as of June 23, 1994,
among HPSC, Inc., The First
National Bank of Boston,
individually and as Agent, and
Bank of America Illinois,
individually and as Co-Agent
16
<PAGE>
EXHIBITS (CONTINUED)
Exhibit Title Method of Filing
------- ----- ----------------
No.
--
10.26 Fourth Amendment, dated as of Filed herewith
December 22, 1994, to
Revolving Credit Agreement
dated as of June 23, 1994,
among HPSC, Inc., The First
National Bank of Boston,
individually and as Agent, and
Bank of America Illinois,
individually and as Co-Agent
10.27 Fifth Amendment, dated as of Filed herewith
January 6, 1995, to Revolving
Credit Agreement dated as of
June 23, 1994, among HPSC,
Inc., The First National Bank
of Boston, individually and as
Agent, and Bank of America
Illinois, individually and as
Co-Agent
10.28 Sixth Amendment, dated as of Filed herewith
February 3, 1995, to Revolving
Credit Agreement dated as of
June 23, 1994, among HPSC,
Inc., The First National Bank
of Boston, individually and as
Agent, and Bank of America
Illinois, individually and as
Co-Agent
10.29 Seventh Amendment, dated as of Filed herewith
February 6, 1995, to Revolving
Credit Agreement dated as of
June 23, 1994, among HPSC,
Inc., The First National Bank
of Boston, individually and as
Agent, and Bank of America
Illinois, individually and as
Agent.
10.30 Stock Purchase Agreement, Incorporated by reference
dated as of November 1, 1994, to Exhibit 10.3 to HPSC's
by and among HPSC, Inc. and Quarterly Report on Form
each of Chemical Bank; The CIT 10-Q for the quarter ended
Group/Business Credit, Inc.; September 24, 1994
Van Kampen Merritt Prime Rate
Income Trust; the Nippon
Credit Bank, Ltd.; Union Bank
of Finland, Grand Cayman
Branch; SPBC, Inc.; The Bank
of Tokyo Trust Company; and
Morgens, Waterfall, Vintiadis
& Co. Inc., and related
Schedules
17
<PAGE>
EXHIBITS (CONTINUED)
Exhibit Title Method of Filing
------- ----- ----------------
No.
--
10.31 Purchase and Contribution Filed herewith
Agreement dated as of January
31, 1995 between HPSC, Inc.
and HPSC Bravo Funding Corp.
10.32 Credit Agreement dated as of Filed herewith
January 31, 1995 among HPSC
Bravo Funding Corp., Triple-A
One Funding Corporation, as
lender, and CapMAC, as
Administrative Agent and as
Collateral Agent
10.33 Agreement to Furnish Copies Filed herewith
of Omitted Exhibits to
Certain Agreements with HPSC
Bravo Funding Corp.
13 Annual Report to Stockholders Filed herewith
for the fiscal year ended
December 31, 1994
21 Subsidiaries of HPSC, Inc. Filed herewith
23 Report of Coopers & Lybrand, Filed herewith
L.L.P.
27 HPSC, Inc. Financial Data Filed herewith
Schedule
Copies of Exhibits may be obtained for a nominal charge by writing to:
Investor Relations
HPSC, Inc.
60 State Street
Boston, Massachusetts 02019
(b) Reports on Form 8-K
None
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, HPSC, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HPSC, Inc.
By: John W. Everets
-------------------
Dated: March 23, 1995 John W. Everets
Chairman, Chief Executive
Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
HPSC, Inc. and in the capacities and on the dates indicated.
NAME TITLE DATED
By: Rene Lefebvre Vice President, Chief March 23, 1995
----------------------- Financial Officer and
Rene Lefebvre Treasurer (Principal
Financial Officer)
By: Raymond R. Doherty President and Director March 23, 1995
-----------------------
Raymond R. Doherty
By: Dennis J. McMahon Vice President March 23, 1995
----------------------- Administration
Dennis J. McMahon (Principal Accounting
Officer)
By: Louis J.P. Calisti Director March 23, 1995
-----------------------
Louis J.P. Calisti
By: Dollie A. Cole Director March 23, 1995
-----------------------
Dollie A. Cole
By: Thomas M. McDougal Director March 23, 1995
-----------------------
Thomas M. McDougal
By: Samuel P. Cooley Director March 23, 1995
-----------------------
Samuel P. Cooley
By: Joseph A. Biernat Director March 23, 1995
-----------------------
Joseph A. Biernat
By: J. Kermit Birchfield Director March 23, 1995
-----------------------
J. Kermit Birchfield
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of HPSC, Inc.:
Our report on the consolidated financial statements of HPSC, Inc. has been
incorporated by reference in this Form 10-K from page 14 of the 1994 Annual
Report to Stockholders of HPSC, Inc. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in Item 14(a)2 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand, L.L.P.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
March 15, 1995
<PAGE>
SCHEDULE VIII
HPSC, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Balance at Charged to Balance
Beginning Costs and Deductions at end of
Description of Year Expenses (1) year
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for losses 1994 $6,897 $754 $3,056 $4,595
-------------------------------------------------------------------------
Allowance for losses 1993 9,216 15,104 17,423 6,897
-------------------------------------------------------------------------
Allowance for losses 1992 11,033 4,307 6,124 9,216
-------------------------------------------------------------------------
<FN>
(1) Deductions are write-offs net of recoveries.
</TABLE>
<PAGE>
EXHIBIT 10.1
LEASE
BETWEEN
TRUSTEES OF 60 STATE STREET TRUST
AND
HPSC, INC.
Dated: March 8, 1994
BROWN, RUDNICK, FREED & GESMER
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
Portion of
Thirty-Fifth (35th) Floor
60 State Street
Boston, Massachusetts
LEASE
dated as of March 8, 1994
<PAGE>
ARTICLE I
Reference Data
1.1 Subjects Referred To. Each reference in this Lease to any of the
following subjects shall be construed to incorporate the data stated for that
subject in this Article:
LANDLORD: Trustees of 60 State Street
Trust under Declaration of Trust
dated September 10, 1970, and
recorded with Suffolk Deeds in
Book 8389, Page 286, as amended.
LANDLORD'S ORIGINAL ADDRESS: c/o Koll Management Services
60 State Street
Boston, Massachusetts 02109
TENANT: HPSC, Inc.
TENANT'S ORIGINAL ADDRESS: 470 Atlantic Avenue
2nd Floor
Boston, Massachusetts 02210
TENANT'S NOTICE ADDRESS
AFTER THE COMMENCEMENT DATE: 60 State Street
Boston, Massachusetts 02109
PREMISES: That portion of the floor, shown on Exhibit A, of the building (the
"Building") erected by Landlord on the land described in Exhibit B,
plus or minus any additions or deletions thereto or therefrom
resulting from the change of any abutting lot or street line (the
"Lot"). The Building and the Lot are herein collectively referred to
as the "Property." The Premises exclude exterior faces of exterior
walls, the common stairways and
-1-
<PAGE>
stairwells, elevators and elevator wells, fan rooms, electric and
telephone closets, janitor closets, freight elevator vestibules, and
pipes, ducts, conduits, wires and appurtenant fixtures serving
exclusively or in common other parts of the Building, and if the
Premises include less than the entire rentable area of any floor, the
Premises also exclude the common corridors, elevator lobby and toilets
located on such floor.
TERM: A period beginning on the Commencement Date (as defined in Section
2.4) and ending one hundred twenty-two (122) full calender months
thereafter, unless sooner terminated or extended as provided in this
Lease.
SCHEDULED COMMENCEMENT DATE: May 1, 1994
RENT COMMENCEMENT DATE: 60 days after Commencement Date
BASE RENT: $191,305.95 per year ($15,942.16 per month; $23.43 per square of
Rentable Floor Area).
RENTABLE FLOOR AREA OF
THE PREMISES: 8,165 square feet
RENTABLE FLOOR AREA OF
THE BUILDING: 823,014 square feet
ELECTRICITY CHARGE: $8,165.00 per year ($680.42 per month; $1.00 per square
foot of Rentable Floor Area)
LANDLORD'S CONSTRUCTION
REPRESENTATIVE: Mr. Robert Tagliamonte
TENANT'S CONSTRUCTION
REPRESENTATIVE: Mr. John Everets
PERMITTED USES: Office purposes, and no other purpose.
BROKERS: Lynch, Murphy, Walsh & Partners and Whittier Partners
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<PAGE>
TENANT'S PROPORTIONATE SHARE: .99% (proportion of Rentable Floor Area of
the Premises to one hundred percent (100%) of
the Rentable Floor Area of the Building)
OPERATING EXPENSE BASE: Tenant's Proportionate Share of Operating Expenses for
the 1993 Calendar Year.
TAX EXPENSE BASE: Tenant's Proportionate Share of Tax Expenses for the 1994
Fiscal Year (7/1/93 - 6/30/94).
1.2 Exhibits. There are incorporated as part of this Lease:
EXHIBIT A - Tenant's Floor Plan
EXHIBIT B - Lot Description
EXHIBIT C - Landlord's Services
EXHIBIT D - Work Letter Agreement
EXHIBIT E - Leasing Rights of Other Tenants with respect to 34th and
35th floors
EXHIBIT F - Forms of Subordination of Mortgage Agreements
1.3 Table of Articles and Sections.
ARTICLE I - Reference Data .................................. 1
1.1 Subjects Referred To ............................. 1
1.2 Exhibits ......................................... 3
1.3 Table of Articles and Sections ................... 3
ARTICLE II - Premises, Term and Rent ........................ 5
2.1 The Premises ..................................... 5
2.2 Rights to Use Common Facilities .................. 6
2.3 Landlord's Reservations .......................... 7
2.4 Term ............................................. 7
2.5 Rent; Base Rent; Electricity Charge .............. 11
2.6 Additional Rent - Operating Expenses ............. 11
2.7 Additional Rent - Real Estate Taxes .............. 14
ARTICLE III - Initial Construction and Alterations .......... 17
3.1 Leasehold Improvements by Landlord ............... 17
3.2 Alterations by Tenant ............................ 17
-3-
<PAGE>
ARTICLE IV - Landlord's Covenants; Interruptions
and Delays .............................................. 19
4.1 Landlord's Covenants ............................. 19
4.2 Interruption and Delays in Services and Repairs .. 20
4.3 Right to Stop Service or Utility System .......... 20
ARTICLE V - Tenant's Covenants .............................. 21
5.1 Repair and Yield Up .............................. 21
5.2 Use .............................................. 21
5.3 Obstructions; Items Visible From Exterior;
Rules and Regulations ........................... 21
5.4 Safety Appliances; Licenses ...................... 22
5.5 Indemnity; Insurance ............................. 22
5.6 Personal Property at Tenant's Risk ............... 25
5.7 Right of Entry ................................... 25
5.8 Floor Load; Prevention of Vibration and Noise .... 25
5.9 Personal Property Taxes .......................... 25
5.10 Payment of Litigation Expenses ................... 26
5.11 Environmental Compliance ......................... 26
5.12 Compliance with Energy Conservation Controls ..... 27
ARTICLE VI - Casualty And Taking ............................ 27
6.1 Casualty ......................................... 27
6.2 Eminent Domain ................................... 30
ARTICLE VII - Rights of Parties Holding Prior Interests ..... 31
7.1 Lease Subordinate ................................ 31
7.2 Rights of Holder of Mortgage to Notice of
Defaults by Landlord and to Cure Same ........... 31
7.3 Modification for Lender .......................... 32
ARTICLE VIII - Default ...................................... 32
8.1 Events of Default ................................ 32
8.2 Damages .......................................... 33
ARTICLE IX - Assignment and Subletting ...................... 35
9.1 Definitions ...................................... 35
9.2 Tenant's Request for Consent ..................... 35
9.3 Landlord's Option to Cancel ...................... 36
9.4 Terms of Assignment or Sublease .................. 36
9.5 Provisions in Sublease or Assignment ............. 37
9.6 Related Expenses ................................. 37
9.7 No Default by Tenant; Prohibited Assignments ..... 37
ARTICLE X - Miscellaneous ................................... 37
10.1 Headings; Recordation; Consent or Approval;
Notices; Bind and Inure; "Including"; "Laws" ... 37
10.2 Landlord's Failure to Enforce .................... 39
10.3 Acceptance of Partial Payments of Rent;
Delivery of Keys ................................ 39
10.4 Partial Invalidity ............................... 39
10.5 Landlord's Option to Cure ........................ 40
10.6 Tenant's Estoppel Certificate and Financial
Statements ...................................... 40
-4-
<PAGE>
10.7 Waiver of Subrogation ............................ 41
10.8 All Agreements Contained ......................... 41
10.9 Brokerage ........................................ 41
10.10 Submission Not An Option ......................... 41
10.11 Applicable Law ................................... 41
10.12 Massachusetts Jurisdiction ....................... 42
10.13 Waiver of Jury Trial ............................. 42
10.14 Holdover ......................................... 42
10.15 Surrender of Premises ............................ 42
10.16 Late Payment ..................................... 42
10.17 Time ............................................. 43
10.18 Harmony .......................................... 43
10.19 Limitation On Liability .......................... 43
10.20 Authority ........................................ 44
ARTICLE II
Premises, Term and Rent
2.1 The Premises.
2.1.1 Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Premises.
2.1.2 Upon six months prior notice to Tenant, one time during the Term,
Landlord may at any time relocate the Premises to comparable space within the
Building. For the purpose of the previous sentence, "comparable" shall mean of
equal or greater area with similar directional views and on floor 18 of the
Building or above. Landlord shall pay all costs of any relocation of the
Premises, including the installation of leasehold improvements of design and
quality comparable to those in the Premises. In the event of any relocation of
the Premises, this Lease shall be amended as necessary to substitute the new
Premises.
2.1.3. Subject to existing leasing rights of other tenants in the
Building as more particularly described in Exhibit E, and provided such space is
available, Landlord shall offer to Tenant any space becoming available during
the initial 122 month Term of the Lease on the 34th and the 35th Floor of the
Building (the "Expansion Space") by written notice, setting forth the
description of the Expansion Space, the estimated date on which the Expansion
Space will become available, and the Base Rent for the Expansion Space, and
Tenant shall have the right to add the Expansion Space to the Premises on the
terms and conditions hereinafter described, provided that (i) Tenant shall not
be in default under any of the terms of this Lease continuing beyond any
applicable notice and cure period, (ii) Tenant shall not have assigned this
Lease or sublet any portion of the Rentable Floor Area of the Premises, (iii)
Tenant continues to occupy all portions of the Premises, (iv) Tenant has not
exercised its Termination Option as set forth in Article 2.4.2, and (v) if
between 12
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<PAGE>
and 24 months remain in the initial Term and Tenant exercises its Extension
Option as set forth in Section 2.4.1, or if less than 12 months remain in the
initial Term and Tenant previously exercised its Extension Option. The lease of
the Expansion Space shall be co-terminus with this Lease and shall be on all of
the terms and conditions of this Lease except as set forth in Section 2.1.6
below and provided the Base Rent for the Expansion Space shall be at the Market
Rent (as hereinafter defined in Section 2.4.1), taking into account the fact
that Additional Rent shall be paid at the same rate as shall then be paid for
the Premises and the length of the term of such Expansion Space. If any
Expansion Space is offered by Landlord, Tenant shall notify Landlord in writing
within 10 days after receipt of Landlord's notice as to whether Tenant desires
to lease the Expansion Space. If Tenant determines that the Base Rent proposed
by Landlord is not the Market Rent, then Tenant shall set forth such
determination in its notice exercising its right to lease the Expansion Space
and Market Rent shall be determined in accordance with the procedure set forth
in Section 2.4.1. Tenant's failure to so object shall be deemed an acceptance
of Landlord's proposed Base Rent. If Tenant elects to lease the Expansion
Space, the parties promptly shall execute an amendment to this Lease reflecting
the addition of the Expansion Space.
2.1.4. Except as provided in Section 2.1.3 above, Tenant acknowledges
that Landlord shall not be obligated to provide any Expansion Space to Tenant
and that Landlord shall have the unfettered right to lease any and all space in
the Building and that the Expansion Space shall be offered to Tenant only if
such space will be available during the initial Term.
2.1.5. Tenant acknowledges that if Tenant does not accept (or fails to
timely accept) an offer made by Landlord pursuant to the provisions of this
Article 2.1, Landlord shall be under no further obligation with respect to such
Expansion Space by reason of this Article 2.1. Time is of the essence.
2.1.6. Tenant agrees to accept the Expansion Space in its condition and
state of repair existing as of the date it is offered to Tenant, reasonable wear
and tear accepted, and agrees that Landlord shall not be required to perform any
work, supply any materials or incur any expense to prepare such space for
Tenant's occupancy.
2.2 Rights to Use Common Facilities. Tenant shall have the non-exclusive
right to use in common with others the following portions of the Building: (a)
the Building lobbies, corridors, stairways and elevators that provide access to
the Premises, the loading platform, and the pipes, ducts, conduits, wires and
appurtenant meters and equipment serving the Premises, (b) walkways and
driveways that provide access to the Building,
-6-
<PAGE>
and (c) if the Premises include less than the entire rentable floor area of any
floor, the common toilets, corridors and elevator lobbies of such floor. Tenant
shall have no parking rights except as may be provided by separate agreement.
2.3 Landlord's Reservations. Landlord reserves the right, from time to
time, provided Landlord uses reasonable efforts to limit unreasonable
interference with Tenant's use: (a) to install, use, maintain, repair, replace
and relocate for service to the Premises and other parts of the Building, or
either, pipes, ducts, conduits, wires and appurtenant fixtures, wherever located
in the Premises or Building, and (b) to alter or relocate any other common
facility, provided that substitutions are substantially equivalent to or better
than the original. Installations, replacements and relocations referred to in
clause (a) above shall be located so far as reasonable in the central core area
of the Building, above ceiling surfaces, below floor surfaces or within
perimeter walls of the Premises. Landlord also reserves the right, from time to
time, to: (x) change the name or street address of the Building, (y) install and
maintain signs on the exterior and the interior of the Building (other than in
the Premises), and (z) possess pass keys to the Premises.
2.4 Term. Tenant shall have and hold the Premises for the Term. The
Commencement Date for the Term shall be the earlier of the date the Premises are
Ready for Occupancy, provided that Landlord has given Tenant at least fifteen
days' prior notice of such date, or the date Tenant occupies any portion of the
Premises for the conduct of its business. The Premises shall be Ready for
Occupancy when construction of the Leasehold Improvements has been substantially
completed in accordance with the Final Plans, as reasonably determined by
Landlord, and any certificate or approval required by local governmental
authority for occupancy of the Premises has been obtained. Landlord shall use
reasonable efforts to have the Premises Ready for Occupancy on the Scheduled
Commencement Date. If the Premises are not Ready for Occupancy on the Scheduled
Commencement Date, Landlord shall not be liable for such failure, and such
failure shall not affect the validity of this Lease. If, however, the Premises
are not Ready for Occupancy because Tenant has failed to comply with Tenant's
obligations under Section 3.1 or under the Work Letter Agreement attached as
Exhibit D, if any, or has otherwise delayed Landlord in preparing the Premises
or in obtaining any such certificate or approval for the Premises, then the
Commencement Date shall be the date that the Premises would have been Ready for
Occupancy except for such Tenant-caused delay, as reasonably determined by
Landlord. Notwithstanding the foregoing to the contrary, because Landlord shall
not have the Premises Ready for Occupancy by March 31, 1994 (which is the date
on which Tenant's lease for its existing space expires) Tenant promptly shall
request in writing that Tenant's existing landlord permit Tenant to remain in
Tenant's existing space, on the same terms and conditions as Tenant currently is
occupying such space, until
-7-
<PAGE>
April 30, 1994 and shall exercise reasonable efforts to obtain its current
landlord's consent to such extended occupancy. In the event Tenant is unable to
secure the right to extend its occupancy of its existing space on the same terms
and conditions by March 1, 1994, Tenant promptly shall so notify Landlord. If
Tenant so notifies Landlord, then on or before March 15, 1994, Landlord shall
identify, and offer to lease to Tenant interim space in the Building with an
area of at least 8,000 square feet ("Interim Space") at the same rentable square
foot rate of Base Rent, on the same terms for Additional Rent as provided herein
for the Premises, and on the other terms and conditions set forth in this Lease
except that (i) Landlord shall deliver the Interim Space to Tenant in "as is"
condition, (ii) Tenant shall not make any structural or non-structural changes
to the Interim Space, (iii) Tenant shall surrender the Interim Space within
three (3) days of the date the Premises are Ready for Occupancy and, (iv) if the
Interim Space has a Rentable Floor Area in excess of 8,165 square feet, the Base
Rent and Additional Rent shall be calculated as if the Rentable Floor Area of
the Interim Space was 8,165 square feet. Tenant shall respond to the Landlord's
offer of Interim Space within five (5) days from the date the offer is made, and
Tenant's failure to respond shall be deemed a rejection of the offer. If Tenant
has not elected to accept Landlord's offer of the Interim Space for April 1,
1994 occupancy and Landlord determines that the Premises will not be Ready for
Occupancy by May 1, 1994, then Landlord promptly shall so notify Tenant ("Delay
Notice"). Thereafter, Landlord shall provide Tenant with forty-five (45) days
prior written notice of the date on which Landlord expects to have the Premises
Ready for Occupancy ("Estimated Delivery Date"). At any time after the Delay
Notice and up to ten (10) days after Tenant's receipt of the notice of the
Estimated Delivery Date, Tenant shall have the right to lease the Interim Space
which right Tenant shall exercise by written notice to Landlord. The lease of
the Interim Space shall commence on the earlier of the date set forth in such
notice from Tenant or on the date which is thirty (30) days prior to the
Estimated Delivery Date. Landlord shall pay up to one hundred percent (100%) of
the reasonable, documented costs of Tenant's relocation from the Interim Space
to the Premises up to a maximum Landlord payment equal to the lesser of (x) Two
Dollars and 00/100 ($2.00) per square foot of the Premises or (y) seventy-five
percent (75%) of the actual documented costs of Tenant's relocation to the
Interim Space. At the request of either party at any time after the
Commencement Date, Landlord and Tenant shall promptly enter into an agreement
fixing the Commencement Date.
2.4.1. Tenant shall have the option to extend the Term (the "Extension
Option") for one sixty (60) month period (the "Extension Period"), by giving
written notice to Landlord of Tenant's exercise of its Extension Option 12
months prior to the expiration of the Term, provided that, at the time such
Extension Option is exercised and at the commencement of the Extension
-8-
<PAGE>
Period, (i) Tenant shall not be in default under any of the terms of this Lease
(continuing beyond any applicable notice and cure period), (ii) Tenant shall not
have assigned this Lease or sublet any portion of the Rentable Floor Area of the
Premises, and (iii) Tenant continues to occupy all portions of the Premises.
Any failure by Tenant to give timely notice of the exercise of its Extension
Option shall be deemed to be an irrevocable waiver of all right to exercise its
Extension Option. Time is of the essence.
All of the terms, conditions, covenants and agreements contained herein
shall apply during the Extension Period, except that (i) Base Rent for the
Premises during the Extension Period shall be the fair market rental established
by Landlord based on new leases for comparable space in the Building and
comparable downtown Boston office towers ("Market Rent") but in no event less
than Base Rent during the initial Term), (ii) Landlord shall not be obligated to
undertake any additional leasehold improvements or to provide any so called
"free rent" or other tenant inducements, and (iii) Tenant shall have no further
option to extend this Lease. Landlord shall notify Tenant in writing
("Landlord's Notice") of the Market Rent within thirty (30) days of receipt by
Landlord of Tenant's notice exercising its option. If Tenant disagrees with
Landlord's designation of Market Rent, Tenant shall notify Landlord in writing
of Tenant's disagreement not later than ten (10) days after the receipt of
Landlord's Notice. Each party, at its cost and by giving notice to the other
party, shall appoint a qualified M.A.I. real estate appraiser with at least 5
years' full-time commercial appraisal experience in the Boston metropolitan area
to appraise and set the Market Rent for the Premises. If a party does not
appoint such an appraiser within said ten (10) day period, the single appraiser
appointed shall be the sole appraiser and shall set the Market Rent for the
Premises. If two (2) appraisers are appointed by the parties as stated in this
paragraph, the appraisers shall meet promptly and attempt to establish the
Market Rent for the Premises. If they are unable to agree within thirty (30)
days after the second appraiser has been appointed, they shall attempt to elect
a third appraiser meeting the qualifications stated in this paragraph within ten
(10) days after the last day the two appraisers are given to set the Market
Rent. If they are unable to agree on the third appraiser, either of the parties
to this Lease, by giving ten (10) days' notice to the other party, can appeal to
the then president of the Greater Boston Real Estate Board for the selection of
a third appraiser who meets the qualifications stated in this paragraph. Each
of the parties shall bear one-half (1/2) of the cost of appointing and paying
the fee of the third appraiser. The third appraiser, however selected, shall be
a person who has not previously acted in any capacity for either party.
-9-
<PAGE>
Within thirty (30) days after the selection of the third appraiser, a
majority of the appraisers shall set the Market Rent for the Premises. If a
majority of the appraisers are unable to set the Market Rent within the
stipulated period of time, the three (3) appraisals shall be added together and
their total divided by three (3); the resulting quotient shall be the Market
Rent.
If, however, the low appraisal and/or the high appraisal are more than ten
percent (10%) lower and/or higher than the middle appraisal, the low appraisal
and/or the high appraisal shall be disregarded. If only one (1) appraisal is
disregarded, the remaining two (2) appraisals shall be added together and their
total divided by two (2); the resulting quotient shall be the Market Rent. If
both the low appraisal and the high appraisal are disregarded as stated in this
paragraph, the middle appraisal shall be the Market Rent. In making the
determination, each appraiser shall base Market Rent on new leases for space in
the Building.
If the dispute between the parties as to Market Rent has not been resolved
before the commencement of Tenant's obligation to pay Base Rent based upon such
Market Rent, then Tenant shall pay Base Rent in respect of the Premises based
upon the Market Rent first designated by Landlord until a decision of the
appraisers has been finalized, at which time Tenant shall pay any under payment
of rent and other charges to Landlord or Landlord shall refund any overpayment
of Rent and other charges to Tenant. The decision of the appraisers shall be
final and once Tenant has notified Landlord of its election to rely on the
appraisers, Tenant shall not have the right to revoke the exercise of the
Extension Option, even if Tenant disagrees with the decision of the appraisers.
2.4.2 Notwithstanding the foregoing, Tenant shall have the one time option
to terminate this Lease ("Termination Option") effective as of the last day of
the sixty-second (62nd) full calender month of the Term provided (i) Tenant
shall not be in default under any of the terms of the Lease (continuing beyond
any applicable notice and cure period); (ii) Tenant pays to Landlord with
Tenant's notice exercising the Termination Option a termination fee equal to the
sum of (a) three (3) months Base Rent plus Additional Rent, calculated based on
Landlord's reasonable estimate of Additional Rent for the twelve month period
following the date of termination, and (b) Landlord's reasonable, out-of-pocket
transaction costs associated with the lease of the Expansion Space to Tenant,
and (iii) Tenant exercises the Termination Option by written notice to Landlord
received on or before the last day of the fiftieth (50th) full calender month of
the Term. Furthermore, Tenant's exercise of the Termination Option shall be
irrevocable and shall be deemed an irrevocable waiver of all right to exercise
any Expansion Option provided for in Section 2.4.
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2.5 Rent; Base Rent; Electricity Charge.
2.5.1 Tenant shall pay to Landlord at the Original Address of Landlord (or
such other place as Landlord may by notice to Tenant from time to time direct)
the Rent. The Rent shall mean Base Rent and Additional Rent. Additional Rent
shall mean (i) payments required to be made by Tenant pursuant to Sections 2.6
and 2.7 and (ii) all other charges, costs and expenses due and owing Landlord
from Tenant under the terms of this Lease, including the Electricity Charge.
The Rent shall be paid by Tenant to Landlord without abatement, offset or
deduction at the times specified in this Lease, or if no time is specified,
within fifteen (15) days after demand by Landlord.
2.5.2 On the Rent Commencement Date and on the first day of each calendar
month thereafter, Tenant shall pay to Landlord the monthly Base Rent. On the
Commencement Date and on the first day of each calendar month thereafter, Tenant
shall pay the Landlord the monthly Electricity Charge. All payments shall be in
advance for each full calendar month of the Term, and the corresponding fraction
for any fraction of a calendar month at the beginning or end of the Term, and
payments shall be without notice or demand.
2.6 Additional Rent - Operating Expenses. Tenant shall pay Additional
Rent to Landlord for Operating Expenses in accordance with the following
provisions:
2.6.1 Terms used herein are defined as follows:
(a) Operating Expenses means the cost of operation, maintenance
and repair of the Property which shall exclude costs of
special services rendered to tenants (including Tenant) for
which a separate charge is made, but shall include the
following: (i) premiums for insurance carried with respect
to the Property (including insurance against loss of monthly
installments of Base Rent and any Additional Rent which may
be due under this Lease and other leases of space in the
Building in case of fire or casualty and, if there be any
first mortgage of the Property, including such insurance as
may be required by the holder of any such mortgage); (ii)
compensation and all fringe benefits, workers' compensation
insurance premiums and payroll taxes paid by Landlord to,
for or with respect to all persons engaged in the operating,
maintaining, or cleaning of the Building
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or Lot, provided that if a person divides his or her time
between the Building and other properties of Landlord then
only a portion of such person's compensation and fringe
benefits shall be included, which portion shall be based on
the portion of the person's time devoted to the Building;
(iii) steam, water, sewer, electric (including electricity
covered by the Electricity Charge), gas, oil and telephone
charges (excluding utility charges separately chargeable to
tenants for additional or special services); (iv) cost of
building and cleaning supplies and equipment; (v) cost of
maintenance, cleaning (including window cleaning) and
repairs (other than repairs not properly chargeable against
income or for which Landlord has received reimbursement from
contractors under guaranties); (vi) cost of snow removal and
care of landscaping; (vii) payments under service contracts
with independent contractors, including security services,
legal (other than legal fees associated with lease
negotiations and legal actions against tenants and other
than legal fees related to Landlord's organization and
non-real estate tax matters), accounting (other than
accounting fees related to Landlord's income and similar
non-real estate taxes and other than accounting expenses
related to Landlord's ownership entity, as opposed to the
Building) and other reasonable and competitive professional
fees, and reasonable and competitive management fees; (viii)
costs (including financing charges) of improvements to the
Property that were included in Base Operating Expenses until
fully amortized and of improvements that are designed to
increase safety or reduce or limit increases in Operating
Expenses (to the extent of reasonably projected savings
therefrom) or are required to comply with any law imposed
after the date of this Lease, all such improvements to be
amortized over the useful life of the improvement as defined
in the Internal Revenue Code; and (ix) all other reasonable
or necessary expenses paid in connection with the operation,
maintenance and repair of the Property and properly
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chargeable against income. Any of the above services may be
performed by Landlord or its affiliates, provided that fees
for the performance of such services shall be reasonable and
competitive with fees charged by unaffiliated entities for
the performance of such services in comparable buildings in
the City of Boston. Operating Expenses shall not include
leasing commissions, repair costs paid by insurance
proceeds, costs paid by any tenant or third party,
depreciation of the Building or any part thereof except as
specifically set forth above, any debt service or cost of
capital improvements except as specifically set forth above,
or any tenant improvements provided for any tenant.
Operating Expenses shall not include costs reimbursed from
condemnation proceeds; salaries and other employment related
expenses for executives or principals of Landlord above the
grade of building manager (except that an equitable portion
of the Director of Engineering's compensation shall be
included); expenses incurred in connection with removal or
remediation of oil or hazardous materials (as defined in
Massachusetts G.L. c. 21E or the regulations pursuant
thereto), or modifications to the Building required to
comply with laws or regulations existing as of the date
hereof, including those relating to access by handicapped
persons and sprinkler installation except to the extent
included in the Base Operating Expenses; Landlord's off-site
general and administrative expenses. Regardless of the
actual percentage of occupancy of the Building, for the
purpose of this Section 2.6, (i) the components of Operating
Expenses that vary with occupancy will be extrapolated or
proportionately reduced (consistent with the extent of
variability) as though the Building were one hundred percent
(100%) occupied; and (ii) in the case of any services that
are not rendered to all Building areas on a comparable
basis, the proportion of the expense of such service
allocable to the Premises shall be in the same proportion
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which the Rentable Floor Area of the Premises to which the
service is rendered bears to the total Rentable Floor Area
to which such service is rendered.
(b) Fiscal Year means any twelve-month period selected by
Landlord for operating purposes. Landlord may change its
Fiscal Year and interim accounting periods, so long as the
periods so revised are reconciled with prior periods in
accordance with generally accepted accounting principles.
2.6.2 For each Fiscal Year during the Term, Tenant shall pay Tenant's
Proportionate Share of Operating Expenses in excess of the Operating Expense
Base. The Operating Expense Base includes the Electricity Charge. For any
partial Fiscal Year at the beginning or end of the Term, Tenant's Proportionate
Share of Operating Expenses shall be adjusted proportionately for the part of
the Fiscal Year falling within the Term. Tenant's Proportionate Share may
change if the Property is changed or reconfigured, but shall in all cases be
equal to the percentage that the Rentable Floor Area of the Premises bears to
one hundred percent (100%) of the total Rentable Floor Area of the Building,
calculated on a consistent basis.
2.6.3 Before each Fiscal Year, Landlord shall give Tenant an estimate of
the reasonably expected Operating Expenses for the coming Fiscal Year, and an
estimate of Tenant's Additional Rent for such Operating Expenses. Tenant shall
pay such estimated Additional Rent (calculated on a monthly basis) each month
with its payment of Base Rent. After each Fiscal Year, Landlord shall give
Tenant a statement showing the actual Operating Expenses for that Fiscal Year,
and a calculation of the actual amount of Additional Rent related thereto. Any
underpayment by Tenant shall be made up by cash payment to Landlord within
thirty (30) days; any overpayment shall be credited against the next due Base
Rent and Additional Rent, provided that, unless Tenant is in default under the
Lease, any overpayment shall be paid in cash to Tenant within thirty (30) days
if the Term has ended.
2.7 Additional Rent - Real Estate Taxes. Tenant shall pay Additional Rent
to Landlord for Real Estate Taxes in accordance with the following provisions:
2.7.1 Terms used herein are defined as follows:
(a) Tax Year means the 12-month period beginning July 1 of each
year during the Term, or if the appropriate governmental tax
fiscal period shall begin on any date other than July 1,
then such other date.
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(b) Tax Expenses with respect to any Tax Year means the
aggregate Real Estate Taxes on the Property with respect to
that Tax Year, reduced by any abatement receipts with
respect to that Tax Year.
(c) Real Estate Taxes means all taxes and special assessments of
every kind and nature assessed by any governmental authority
on the Property or any part thereof which Landlord shall
become obligated to pay because of or in connection with the
ownership, leasing and operation of the Property (including
the excise prescribed by M.G.L. c.121A, {10 (1988 ed.) and
amounts in excess thereof paid to the City of Boston
pursuant to agreement between Landlord and the City), and
reasonable expenses of any proceedings for the contesting or
the abatement of taxes. The amount of special taxes or
special assessments to be included shall be limited to the
amount of the installment (plus any interest, other than
penalty interest, payable thereon) of such special tax or
special assessment required to be paid during the year in
respect of which such taxes are being determined. There
shall be excluded from such taxes all income, estate,
succession, inheritance and transfer taxes; provided,
however, that if at any time during the Term the present
system of ad valorem taxation of real property shall be
changed so that as a substitute for, or in addition to, the
whole or any part of the ad valorem tax on real property,
there shall be assessed on Landlord any tax including a
capital levy or other tax on the gross rents received with
respect to the Property, or a federal, state, county,
municipal, or other local income, franchise, excise or
similar tax, assessment, levy or charge (distinct from any
now in effect in the jurisdiction in which the Property is
located), and whether or not now customary or in the
contemplation of the parties, measured by or based, in whole
or in part, upon any
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such gross rents, then any and all of such taxes,
assessments, levies or charges, to the extent so measured or
based, shall be deemed to be included within the term Real
Estate Taxes.
2.7.2 For each Tax Year during the Term, Tenant shall pay Tenant's
Proportionate Share of Tax Expenses in excess of the Tax Expense Base. For any
partial Tax Year at the beginning or end of the Term, Tenant's Proportionate
Share of Tax Expenses shall be adjusted proportionately for the part of the Tax
Year falling within the Term.
2.7.3 Before each Tax Year, Landlord shall give Tenant an estimate of the
reasonably expected Tax Expenses for the coming Tax Year, and an estimate of
Tenant's Additional Rent for such Tax Expenses. Tenant shall pay such estimated
Additional Rent (calculated on a monthly basis) each month with its payment of
Base Rent. After each Tax Year, Landlord shall give Tenant a statement showing
the actual Tax Expenses for that Tax Year, and a calculation of the actual
amount of Additional Rent related thereto. Any underpayment by Tenant shall be
made up by cash payment to Landlord within thirty (30) days; any overpayment
shall be credited against the next due Base Rent and Additional Rent, provided
that, unless Tenant is in default under the Lease, any overpayment shall be paid
in cash to Tenant within thirty (30) days if the Term has ended.
2.7.4 Whenever tenants of more than thirty percent (30%) of the total
Rentable Floor Area of the Building (whether or not including Tenant) shall
timely request Landlord to do so, Landlord shall use reasonable efforts to
obtain an abatement of any tax or assessment for public betterment or
improvement, and Landlord shall have the right in its discretion to do so
without such request. The amount of any abatement proceeds with respect to any
year on account of which Tenant shall have made a payment of Additional Rent for
Tax Expenses under Section 2.7 shall, after deduction therefrom of any expenses
reasonably incurred in their collection and not included in Real Estate Taxes
for said year, be allocated to Tenant in the same proportion as was used to
determine Tenant's payment of such Additional Rent for Tax Expenses, and
Landlord shall at its option either pay such amount to Tenant or credit such
amount against monthly installments of Base Rent and Additional Rent next
thereafter ensuing, except with respect to such abatement proceeds as are
received after the end of the Term, with respect to which Landlord shall make
payment to Tenant forthwith upon receipt.
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ARTICLE III
Initial Construction and Alterations
3.1 Leasehold Improvements by Landlord. Landlord and Tenant have approved
the preliminary plans and outline specifications ("Preliminary Plans")
identified in Exhibit D for improvements of the Premises to be installed by
Landlord ("Leasehold Improvements"). Landlord at its initial expense shall
prepare final plans and specifications ("Final Plans"), which need not include
working or shop drawings, in substantial conformance with the Preliminary Plans
and deliver them to Tenant as soon as reasonably possible. Within ten (10)
days after delivery of the Final Plans, Tenant shall give notice of any changes
necessary to bring the Final Plans into substantial conformance with the
Preliminary Plans; Tenant shall not object to any logical development or
refinement of the Preliminary Plans or any change required by applicable law.
Tenant's failure to give Landlord timely notice of such changes shall
constitute its approval of the Final Plans. Landlord shall install the
Leasehold Improvements at its expense in accordance with the Final Plans and the
Work Letter Agreement. The Leasehold Improvements shall be a part of the
Premises and shall remain the property of Landlord. Within fifteen (15) days
after the Commencement Date, Tenant shall give Landlord a "punch list" of any
items needing correction; any matters not shown on the punch list, other than
latent defects, shall be deemed approved by Tenant. Landlord shall, with
reasonable diligence, correct any items on such list that, in Landlord's
reasonable judgment, require correction. Except as set forth herein, Landlord
shall have no obligation to improve the Premises.
3.2 Alterations by Tenant.
3.2.1 Tenant shall not make any alterations, decorations, additions,
installations, substitutes or improvements (hereinafter collectively called
"Alterations") in and to the Premises, without first obtaining Landlord's
consent. Landlord shall not unreasonably withhold or delay its consent;
however, it shall have no obligation to consent to Alterations that would
violate the Certificate of Occupancy or any applicable law, or the terms of any
superior lease or mortgage affecting the Property, adversely affect the
appearance, value, or structure of the Building, require excessive removal
expenses, affect any other part of the Building, adversely affect the
mechanical, electrical, sanitary or other service systems of the Building, or
involve the installation of any materials subject to any liens or conditional
sales contracts. Tenant shall pay Landlord's reasonable costs of reviewing
or inspecting any proposed Alterations and plans therefor.
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3.2.2 All work on any Alterations shall be done at reasonable times
in a first-class workmanlike manner, by contractors approved by Landlord,
according to plans and specifications approved by Landlord. All work shall be
done in compliance with all applicable laws and with all regulations of the
Board of Fire Underwriters or any similar insurance body or bodies. Tenant
shall be solely responsible for the effect of any Alterations on the Building's
structure and systems, whether or not Landlord has consented to the Alterations
and Tenant's plans therefor, and shall reimburse Landlord on demand for any
costs incurred by Landlord by reason of any faulty work done, or damage caused,
by Tenant or its contractors. Upon completion of any Alterations, Tenant shall
provide Landlord with a complete set of "as-built" plans.
3.2.3 Tenant shall keep the Property and Tenant's leasehold interest
therein free of any liens or claims of liens, and shall discharge any such liens
within ten (10) days of their filing. Before commencement of any work,
Tenant's contractor shall provide any lien indemnity bond required by Landlord,
and Tenant shall provide evidence of such insurance as Landlord may require,
naming Landlord as an additional insured. Tenant shall indemnify Landlord and
hold it harmless from and against any cost, claim, or liability arising from
any work done or caused to be done by Tenant. All work shall be done so as to
minimize, to the extent reasonably practicable, interference with other tenants
and with Landlord's operation of the Building or other construction work being
done by Landlord. Landlord may post any notices it considers necessary to
protect it from responsibility or liability for any Alterations, and Tenant
shall give sufficient notice to Landlord to permit such posting.
3.2.4 All Alterations affixed to the Premises shall become part thereof
and remain therein at the end of the Term. However, if Landlord gives Tenant a
notice, at least thirty (30) days before the end of the Term, to remove any
Alterations, Tenant shall do so, and shall pay the cost of removal and any
repair required by such removal. Upon Tenant's written request, Landlord shall
notify Tenant at the time of approval of any Alterations as to whether Tenant
will be required to remove such Alterations. All of Tenant's personal
property, furnishings, trade fixtures, equipment, furniture, movable partitions,
and any Alterations not affixed to the Premises shall remain Tenant's property
("Tenant's Property"), removable at any time, and shall be removed by Tenant at
the end of the Term. If Tenant fails to remove any such Tenant's Property at
the end of the Term, Landlord may do so and store it at Tenant's expense,
without Landlord being liable to Tenant, and may, in accordance with any
applicable law, sell and/or dispose of Tenant's Property at public or private
sale and apply the proceeds to any amounts due hereunder, including costs of
removal, storage and sale.
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ARTICLE IV
Landlord's Covenants; Interruptions and Delays
4.1 Landlord's Covenants.
4.1.1 Landlord shall furnish services, utilities, facilities and
supplies set forth in Exhibit C.
4.1.2 Landlord shall furnish, at Tenant's expense, reasonable
additional Building services which are usual and customary in similar office
buildings in Boston upon reasonable advance request of Tenant at reasonable
rates from time to time established by Landlord.
4.1.3 Except as otherwise provided in Article V or VI, Landlord shall
make such repairs to the roof, exterior walls (including exterior windows),
floor slabs, Building heating, ventilating and air conditioning system, plumbing
and electrical and other mechanical systems, elevators and all other common
areas and facilities as may be necessary to keep them in serviceable condition.
4.1.4 Landlord shall provide and install, at Tenant's expense,
letters or numerals on doors to the Premises to identify Tenant's official name
and Building address; all such letters and numerals shall be in the building
standard graphics and no others shall be used or permitted on the Premises.
4.1.5 Landlord covenants that, with respect to claims made by,
through or under Landlord, Tenant, on paying Rent and performing the tenant
obligations in this Lease, shall peacefully and quietly have, hold and enjoy the
Premises, subject to all of the terms and provisions of this Lease and any
mortgage to which this Lease is subordinate.
4.1.6 Landlord agrees to maintain throughout the Term of this Lease
casualty, property and liability coverage in amounts customarily maintained for
first class office towers in the downtown Boston area or in such higher amounts
as may be required by Landlord's mortgagees or as Landlord may determine to be
appropriate, and the cost thereof shall be included in Operating Expenses.
4.1.7 Landlord shall defend, save harmless, and indemnify Tenant from
any liability for injury, loss, accident or damage (but in no event any
consequential damages) to any person or property, and from any claims, actions,
proceedings and expenses and costs in connection therewith (including actual
counsel fees) arising from negligence or other misconduct of Landlord, its
employees, agents and contractors. Furthermore, Landlord agrees that
Landlord's insurance shall be primary with respect to the Building's common
areas except with respect to
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liability arising from the omission, fault, willful act, negligence or other
misconduct of Tenant, its employees, agents and contractors. Notwithstanding
the foregoing, Landlord shall be fully exculpated from any loss or damage
described in Sections 4.2, 5.6 and 6.1.7.
4.1.8 Throughout the Term, Landlord shall maintain property insurance
on the Building and on Leasehold Improvements and Alterations affixed to the
Premises (in accordance with Section 6.1.6) for the full replacement cost
thereof with an agreed amount endorsement provided such insurance may provide
for a commercially reasonably deductible. The cost of such insurance and any
deductible (except to the extent such deductible is charged to a specific
tenant) shall be included in Operating Expenses.
4.2 Interruption and Delays in Services and Repairs.
4.2.1 Landlord shall not be liable to Tenant for any compensation or
reduction of rent by reason of inconvenience or annoyance or for loss of
business arising from the necessity of Landlord or its agents entering the
Premises for any of the purposes authorized in this Lease, or for repairing the
Premises or any portion of the Building, however the necessity may occur, unless
such necessity for entering or repairing is due to Landlord's negligence or
willful misconduct. Landlord shall use reasonable efforts to minimize
inconvenience, annoyance and loss of business to Tenant.
4.2.2 In case Landlord is prevented or delayed from making any
repairs, alterations or improvements, or furnishing any services or performing
any other covenant or duty to be performed on Landlord's part, by reason of any
cause beyond Landlord's control, including governmental regulation, scarcity of
or inability to obtain labor or materials, labor difficulties, or casualty,
Landlord shall not be liable to Tenant therefor, nor, except as expressly
otherwise provided in Article VI, shall Tenant be entitled to any abatement or
reduction of Rent by reason thereof, nor shall the same give rise to a claim in
Tenant's favor that such failure constitutes actual or constructive, total or
partial, eviction from the Premises.
4.3 Right to Stop Service or Utility System. Landlord reserves the right
to stop any service or utility system when necessary by reason of casualty or
emergency; provided, however, that in each instance of stoppage, Landlord shall
exercise reasonable diligence to make necessary repairs or otherwise to
eliminate the cause thereof. Except in the case of emergency repairs, Landlord
shall give Tenant reasonable advance notice of any contemplated stoppage and
will use reasonable efforts to avoid unnecessary inconvenience to Tenant by
reason thereof.
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ARTICLE V
Tenant's Covenants
5.1 Repair and Yield Up. Except as otherwise provided in Article VI and
Section 4.1.3, Tenant shall (a) keep the Premises in good order, repair and
condition, reasonable wear and tear only excepted, and all glass in windows
(except glass in exterior walls, unless the damage thereto is attributable to
Tenant's negligence or misuse) and doors of the Premises whole and in good
condition with glass the same quality as that injured or broken, damage by fire
or other casualty only excepted; and (b) reimburse Landlord for its costs to
repair damage caused elsewhere in the Building which is attributable to
Tenant's acts and omissions including negligence. Tenant shall promptly give
Landlord notice of any damage to, or defect in, the Premises. At the end of
the Term, Tenant shall peaceably yield up the Premises, including Leasehold
Improvements and all Alterations affixed to the Premises (except to the extent
Landlord has given notice pursuant to Section 3.2.4 requiring Tenant to remove
any Alterations), in good order, repair and condition, reasonable wear and tear
and damage by fire excepted, first removing all Tenant's Property, and repairing
any damage caused by such removal and restoring the Premises and leaving them
clean and neat. The exception for reasonable wear and tear shall not permit
Tenant to maintain the Premises in less than good condition.
5.2 Use. From the Commencement Date, Tenant shall not use the Premises
other than for the Permitted Uses, and shall not injure or deface the Premises,
Building or Lot, nor permit in the Premises any auction sale, vending machines
(other than for Tenant's use), or inflammable fluids or chemicals, or nuisance,
or the emission from the Premises of any objectionable noise, odor, vibration
nor any use thereof which is inconsistent with the maintenance of the Building
as an office building of first class quality in maintenance, use and occupancy,
or which is improper, offensive, contrary to law or liable to invalidate, or
increase the premiums, for any insurance on the Building or its contents or
liable to render necessary any alteration or addition to the Building. Tenant
agrees that the ratio of the number of people regularly occupying the Premises
between the hours of 8:00 a.m. and 6:00 p.m., Monday through Friday, inclusive,
will not exceed one (1) person per two hundred (200) rentable square feet.
5.3 Obstructions; Items Visible From Exterior; Rules and Regulations.
Tenant shall not obstruct in any manner any portion of the Property not included
within the Premises; and shall not, without the prior consent of Landlord,
permit the painting or placing of any curtains, blinds, shades, awnings, aerials
or flagpoles or the like, visible from outside the Premises; and shall comply
with reasonable rules and regulations ("Rules and Regulations") of substantially
general applicability now or hereafter made by Landlord, of which Tenant has
been given prior
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notice, for the care and use of the Property and its facilities and approaches.
Landlord shall not be liable to Tenant for the failure of other occupants of
the Building to conform to such Rules and Regulations. Landlord agrees to use
reasonable efforts to enforce the rules and regulations in a substantially non-
discriminatory manner, taking into account the particulars of each situation and
the terms of the other tenants' leases.
5.4 Safety Appliances; Licenses. Tenant shall keep the Premises equipped
with all safety appliances required by law because of any use made by Tenant
other than generic office use, and shall procure all licenses and permits so
required because of such use and, if requested by Landlord, shall do any work so
required because of such use, it being understood that the foregoing provisions
shall not be construed to broaden in any way Tenant's Permitted Uses.
5.5 Indemnity; Insurance.
5.5.1 Tenant shall defend with counsel first approved by Landlord,
save harmless, and indemnify Landlord from any liability for injury, loss,
accident or damage to any person or property, and from any claims, actions,
proceedings and expenses and costs in connection therewith (including actual
counsel fees) (i) arising from (A) the omission, fault, willful act, negligence
or other misconduct of Tenant, its employees, agents and contractors, or (B)
any use made or thing done or occurring on the Premises not due to the
omission, fault, willful act, negligence or other misconduct of Landlord, its
employees, agents and contractors, or (ii) resulting from the failure of Tenant
to perform and discharge its covenants and obligations under this Lease.
5.5.2 Tenant shall obtain, at Tenant's sole cost and expense, during
the entire Term, and maintain and keep in full force and effect, the following
insurance:
(a) (i) Property insurance including fire, extended coverage,
vandalism, malicious mischief, sprinkler leakage, and all risks
coverage upon property of every description and kind owned by
Tenant and located in the Building or for which Tenant is legally
liable or installed by or on behalf of Tenant including Tenant's
Property (but excluding Leasehold Improvements and Alterations
affixed to the Premises insured by Landlord pursuant to Section
6.1.6), in an amount not less than one hundred
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percent (100%) of the full replacement cost thereof in new
condition without deduction for depreciation and in amounts that
meet any co-insurance clauses of the policies of insurance.
(ii) Extra expense insurance in an amount sufficient to reimburse
Tenant for loss of use of the Premises attributable to the
prevention of access to the Building or Premises as a result of
the perils insured in clause (i) above.
(b) A policy of comprehensive liability insurance coverage to include
personal injury, bodily injury, broad form property damage,
premises/operations, owner's protective coverage, blanket contractual
liability including assumed liability for use of the Premises
including performance by Tenant of the indemnity agreements set forth
in this Lease, products and completed operations liability, fire
legal liability, premises medical expenses in limits not less than
Five Million and 00/100 Dollars ($5,000,000.00), inclusive. Such
policy shall name Landlord and Landlord's mortgagees and ground lessor
as additional insureds and shall contain the following provision:
"Such insurance as afforded by this policy for the benefit of Landlord
shall be primary as respects any claims, losses or liabilities arising
out of the use of the Property or Premises by the Tenant or by
Tenant's operation and any insurance carried by Landlord shall be
excess and non-contributing."
(c) Worker's Compensation insurance or similar statutory coverage
containing statutorily prescribed limits and Employer's Liability with
limits of at least $1,000,000 bodily injury by accident for each
accident, $1,000,000 bodily injury by disease for each person and
$1,000,000 bodily injury by disease policy limit.
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(d) Any other form or forms of insurance in amounts and against such
risks as Landlord or the mortgagees or ground lessor of Landlord may
reasonably require from time to time.
5.5.3 All policies shall be taken out with insurers having a rating
of not less than A:XII in Best's Key Rating Guide, or which is otherwise
acceptable to Landlord and in form satisfactory to Landlord from time to time
and contain a cross-liability endorsement or severability of interest clause
acceptable to Landlord and be primary as to all claims thereunder and provide
that any insurance carried by Landlord is not excess and in non-contributing
with any insurance requirement of Tenant. Tenant shall deliver certificates of
insurance in a form and substance satisfactory to Landlord or, if at any time
required by the mortgagees or ground lessor of Landlord, certified copies of
each such insurance policy, to Landlord as soon as practicable after the placing
of the required insurance, but in no event later than ten (10) days prior to the
Commencement Date. All policies shall contain an undertaking by the insurers to
notify Landlord and the mortgagees or ground lessor of Landlord in writing not
less than thirty (30) days prior to any change, reduction in coverage,
cancellation or other termination thereof.
5.5.4 Intentionally Deleted.
5.5.5 Tenant shall not keep or use in or upon the Premises any
article which may be prohibited by any insurance policy in force from time to
time covering the Premises or the Property. If Tenant's occupancy or conduct of
business in or on the Premises, whether or not Landlord has consented to the
same, results in any increase in premiums for the insurance carried from time to
time by Landlord with respect to the Building, Tenant shall pay any such
increase in premiums as Additional Rent within ten (10) days after being billed
therefor by Landlord. In determining whether increased premiums are a result of
Tenant's use or occupancy of the Premises, a schedule issued by the or-
ganization computing the insurance rate on the Property showing the various
components of such rate shall be conclusive evidence of the several items and
charges which make up such rate. Tenant shall promptly comply with all
reasonable requirements of the insurance authority or of any insurer now or
hereafter in effect relating to the Premises.
5.5.6 If (i) any insurance policy carried by Landlord with respect to
the Property shall be cancelled or cancellation shall be threatened or the
coverage thereunder reduced or threatened to be reduced in any way by reason of
the use or occupation of the Premises or any part thereof by Tenant and (ii)
Tenant fails to remedy the condition giving rise to cancellation, threatened
cancellation or reduction of coverage within 48 hours after notice thereof,
such failure shall be deemed a
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default under this Lease, and Landlord may exercise its option to either
terminate this Lease or to enter upon the Premises and attempt to remedy such
condition, in which event Tenant shall pay immediately to Landlord the costs
associated with such termination or entry and attempt to remedy as Additional
Rent. Landlord shall not be liable for any damage or injury caused to any pro-
perty of Tenant or of others located in the Premises as a result of such an
entry.
5.6 Personal Property at Tenant's Risk. Notwithstanding any provisions
hereof to the contrary, Landlord shall not be liable for any damage to property
entrusted to employees of the Building, nor for loss of or damage to any
property by theft or otherwise, nor for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other place or resulting from dampness or any other
patent or latent cause whatsoever. Landlord shall not be liable for interference
with the light or other incorporeal hereditaments.
5.7 Right of Entry. Tenant shall permit Landlord and its agents to
examine the Premises at reasonable times and, if Landlord shall so elect, to
make any repairs or replacements Landlord may deem necessary; to remove, at
Tenant's expense, any Alterations, additions, signs, curtains, blinds, shades,
awnings, aerials, flagpoles, or the like not consented to by Landlord; and to
show the Premises to prospective tenants during the twelve (12) months preceding
expiration of the Term and to prospective purchasers and mortgagees at all
reasonable times.
5.8 Floor Load; Prevention of Vibration and Noise. Tenant shall not place
a load upon the Premises exceeding an average rate of 75 pounds of live load per
square foot of floor area (partitions shall be considered as part of the live
load) without Landlord's prior consent. Landlord reserves the right to prescribe
the weight and position of all safes, files and heavy equipment which Tenant
desires to place in the Premises so as properly to distribute the weight
thereof. Tenant's business machines and mechanical equipment which cause
vibration or noise that may be transmitted to the Building structure or to any
other space in the Building shall be so installed, maintained and used by
Tenant, at Tenant's expense, so as to eliminate such vibration or noise. Tenant
shall pay the cost of all structural engineering required to determine
structural load of unusual installations and all acoustical engineering required
to address any noise or vibration caused by Tenant.
5.9 Personal Property Taxes. Tenant shall pay promptly when due all
taxes which may be imposed upon personal property (including fixtures taxed as
personal property) in the Premises to whomever assessed.
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5.10 Payment of Litigation Expenses. Tenant shall pay promptly on demand
all attorneys' fees and reasonable costs and other fees incurred by Landlord in
connection with the successful enforcement by Landlord of any obligations of
Tenant under this Lease.
5.11 Environmental Compliance. Tenant shall not cause or permit any
biologically or chemically active or other hazardous or toxic wastes, substances
or materials (collectively, "Hazardous Materials") to be used, generated, stored
or disposed of on, under or about, or transported to or from, the Premises or
anywhere on the Property (collectively, "Hazardous Materials Activities")
without first receiving Landlord's written consent, which may be withheld for
any reason and revoked at any time, provided that Tenant may use ordinary
office products in quantities appropriate for the size of the Premises and the
Permitted Use provided the same are stored, used and disposed of in accordance
with the applicable manufacturer's instructions and all applicable laws
("Permitted Hazardous Materials"). If Landlord consents to any such Hazardous
Materials Activities, Tenant shall conduct them in strict compliance (at
Tenant's expense) with all applicable Regulations, as hereinafter defined, and
using all necessary and appropriate precautions. Landlord shall not be liable
to Tenant for any Hazardous Materials Activities by Tenant, Tenant's employees,
agents, contractors, licensees or invitees, whether or not consented to by
Landlord. Tenant shall indemnify, defend with counsel acceptable to Landlord and
hold Landlord harmless from and against any claims, damages, costs and
liabilities arising out of Tenant's Hazardous Materials Activities. For
purposes hereof, Hazardous Materials shall include substances defined as
"hazardous substances," "toxic substances," or "hazardous wastes" in the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; the federal Hazardous Materials Transportation Act, as amended; and
the federal Resource Conservation and Recovery Act, as amended ("RCRA"); those
substances defined as "hazardous wastes" in the Massachusetts Hazardous Waste
Facility Siting Act, as amended (Massachusetts General Laws Chapter 21D); those
substances defined as "hazardous materials" or "oil" in Massachusetts General
Laws Chapter 21E, as amended; and as such substances are defined in any
regulations adopted and publications promulgated pursuant to said laws
(collectively, "Regulations"). Prior to using, storing or maintaining any
Hazardous Materials on or about the Premises, Tenant shall provide Landlord with
a list of the types and quantities thereof, and shall update such list as
necessary for continued accuracy. Tenant shall also provide Landlord with a copy
of any Hazardous Materials inventory statement required by any applicable
Regulations, and any update filed in accordance with any applicable Regulations.
If Tenant's activities violate or create a risk of violation of any
Regulations, Tenant shall cease such activities immediately upon notice from
Landlord. Tenant shall
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immediately notify Landlord both by telephone and in writing of any spill or
unauthorized discharge of Hazardous Materials or of any condition constituting
an "imminent hazard" under RCRA, except that such notice shall not be required
with respect to Permitted Hazardous Materials. If any mortgagee or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of Hazardous Materials by Tenant or with respect to the Premises as a
result of any Hazardous Materials Activities on the Premises or otherwise, then
the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon
demand, as Additional Rent, if and to the extent such testing reveals any such
release by Tenant. In addition, Tenant shall execute affidavits, representations
and the like from time to time at Landlord's request concerning Tenant's best
knowledge and belief regarding the presence of Hazardous Materials and any
Hazardous Materials Activities relating to the Premises. Without limiting the
generality of any other provision of this Section or this Lease, Tenant shall
defend with counsel acceptable to Landlord, hold harmless and indemnify Landlord
from any release of Hazardous Materials on the Premises or the Property to the
extent relating to the activities of Tenant. All references in this Section to
Tenant shall include Tenant's agents, employees, contractors, invitees and all
other parties claiming by, through or under Tenant. The covenants of this
Section shall survive the expiration or earlier termination of the Term of this
Lease.
5.12 Compliance with Energy Conservation Controls. Tenant shall comply
with all applicable mandatory and, if requested by Landlord and, if they do not
unreasonably interfere with Tenant's use of the Premises, voluntary, energy
conservation controls and requirements imposed or instituted by federal, state
or local governments or by the applicable utility provider including controls on
the permitted range of temperature settings and requirements necessitating
curtailment of the volume of energy consumption or the hours of operation.
ARTICLE VI
Casualty And Taking
6.1 Casualty.
6.1.1 If, during the Term of this Lease, the Premises or the Building
are wholly or partially damaged or destroyed by fire or other casualty, and the
casualty renders the Premises totally or partially inaccessible or unusable by
Tenant in the ordinary conduct of Tenant's business, then Landlord shall, within
thirty (30) days of the date of the damage, give Tenant a notice ("Damage
Notice") stating whether, according to Landlord's good faith estimate, the
damage can be repaired within
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three hundred sixty-five (365) days from the date of damage ("Repair Period"),
without the payment of overtime or other premiums. The parties' rights and
obligations then shall be governed according to whether the casualty is an
Insured Casualty or an Uninsured Casualty as set forth in the following
sections.
6.1.2 If the casualty results from a risk, the loss to Landlord from
which is covered by insurance maintained, or would have been covered by
insurance required to be maintained, by Landlord or for Landlord's benefit
(except for any deductible amount), it shall be an "Insured Casualty" and
governed by this Section 6.1.2. In such event, if the Damage Notice states that
the repairs can be completed within the Repair Period without the payment of
overtime or other premiums, then Landlord shall proceed with reasonable
promptness to make the repairs, this Lease shall remain in full force and
effect, and Base Rent shall be reduced, during the period between the casualty
and substantial completion of the repairs, in proportion to the portion of the
Premises that is inaccessible or unusable during that period and which is, in
fact, not utilized by Tenant. Base Rent shall not be reduced by reason of any
portion of the Premises being unusable or inaccessible for a period of five (5)
business days or less. If Landlord does not substantially complete such repair
within the Repair Period, Tenant may terminate this Lease upon sixty (60) days
written notice to Landlord which termination shall be effective only if Landlord
does not substantially complete the repair within said sixty (60) day period. If
the Damage Notice states that the repairs cannot, in Landlord's estimate, be
completed within the Repair Period without the payment of overtime or other
premiums, then either party may, by written notice to the other, terminate this
Lease as of the date of the occurrence of such damage or destruction, by notice
given to the other within thirty (30) days after the giving of the Damage
Notice. If neither party so terminates, then this Lease shall remain in effect,
Landlord shall make repairs, and Base Rent shall be proportionately reduced as
set forth above during the period when the Premises is inaccessible or unusable
and is not used by Tenant.
6.1.3 If the casualty is not an Insured Casualty as set forth in the
previous section, it shall be an "Uninsured Casualty" governed by this Section
6.1.3. In such event, if the Damage Notice states that the repairs can be
completed within the Repair Period without the payment of overtime or other
premiums, Landlord may elect, by notice given to Tenant within thirty (30) days
after the Damage Notice, to make the repairs, in which event this Lease shall
remain in effect and Base Rent shall be proportionately reduced as set forth
above. If Landlord does not so elect to make the repairs, or if the Damage
Notice states that the repairs cannot be made within the Repair Period, this
Lease shall terminate as of the date of the casualty.
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6.1.4 Notwithstanding the foregoing, if the Premises or the Building
are wholly or partially damaged or destroyed as a result of the willful
misconduct of Tenant or its agents, employees, licensees, invitees or
contractors, and Landlord elects to undertake to repair or restore all such
damage or destruction, such repair and restoration shall be at Tenant's sole
cost and expense, and this Lease shall continue in full force and effect without
any abatement or reduction in Base Rent or other payments owed by Tenant;
provided, however, that Tenant shall be relieved of its obligation pursuant to
this Section 6.1.4 to the extent that insurance proceeds are collected by
Landlord pursuant to insurance policies carried by Landlord, in which case
Tenant shall be responsible for the payment of the deductible and that portion
not covered by insurance.
6.1.5 Notwithstanding anything to the contrary contained in this
Section 6.1, if the Premises or the Building are wholly or partially damaged or
destroyed within the final six months of the Term of this Lease, Landlord shall
not be required to repair such casualty and either Landlord or Tenant may elect
to terminate this Lease as of the date of the occurrence of such damage or
destruction if Landlord does not notify Tenant within thirty (30) days of the
occurrence of such casualty that Landlord has elected to repair such casualty.
6.1.6 Under no circumstances shall Landlord be required to repair any
damage to, or make any repairs to or replacements of, Tenant's Property.
However, as part of Operating Expenses, Landlord shall insure the Leasehold
Improvements and any Alterations that are not Tenant's Property and of which
Landlord has received notice and approved, and shall cause such Leasehold
Improvements and Alterations to be repaired and restored to the extent of the
proceeds of insurance (less the costs of obtaining same including reasonable fee
for attorneys and insurance adjusters), except that Tenant shall pay for such
portion which is covered by the deductible. Landlord shall have no
responsibility for any contents placed or kept in or on the Premises or the
Building by Tenant or Tenant's agents, employees, invitees or contractors.
6.1.7 This Section 6.1 shall be Tenant's sole and exclusive remedy in
the event of damage or destruction to the Premises or the Building. No
damages, compensation or claim shall be payable by Landlord for any
inconvenience, any interruption or cessation of Tenant's business, or any
annoyance, arising from any damage to or destruction of all or any portion of
the Premises or the Building, regardless of the cause.
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6.2 Eminent Domain.
6.2.1 If the whole of the Premises, or so much of the Premises as to
render the balance unusable by Tenant, shall be taken or appropriated under
the power of eminent domain or condemnation (a "Taking"), this Lease shall
automatically terminate as of the earlier of the date of final judgment in such
Taking proceedings, or the date possession is taken by the Taking authority.
If any part of the Property is the subject of a Taking and such Taking
materially affects the normal operation of the Building or common areas,
Landlord may elect to terminate this Lease. A sale by Landlord to the taking
authority under threat of a Taking shall constitute a Taking for the purpose of
this Section 6.2. No award for any partial or entire Taking shall be
apportioned. Landlord shall receive (subject to the rights of Landlord's
mortgagees) and Tenant hereby assigns to Landlord any award which may be made
and any other proceeds in connection with such Taking, together with all rights
of Tenant to such award or proceeds, including any award or compensation for the
value of all or any part of the leasehold estate; provided that nothing
contained in this Section 6.2.1 shall be deemed to give Landlord any interest
in or to require Tenant to assign to Landlord any separate award made to Tenant
for (a) the taking of Tenant's Property, or (b) interruption of or damage to
Tenant's business, or (c) Tenant's moving and relocation costs.
6.2.2 In the event of a Taking which does not result in a termination
of the Lease, Base Rent shall be proportionately reduced based on the portion of
the Premises rendered unusable, and Landlord shall restore the Premises or the
Building to the extent of the available proceeds or awards from such Taking
which are applicable to the Premises. Landlord shall not be required to repair
or restore any damage to Tenant's Property or any Alterations that are not
affixed to the Premises.
6.2.3 No temporary Taking of the Premises or any part of the Premises
or of Tenant's rights to the Premises or under this Lease shall terminate this
Lease or give Tenant any right to any abatement of any payments owed to Landlord
pursuant to this Lease; any award made to Tenant by reason of such temporary
Taking shall belong entirely to Tenant. For purposes hereof, a temporary Taking
shall mean a taking of two hundred seventy (270) days or less.
6.2.4 This Section 6.2 sets forth Tenant's and Landlord's sole
remedies for any Taking. Upon termination of this Lease pursuant to this
Section 6.2, Tenant and Landlord hereby agree to release such other from any
and all obligations and liabilities with respect to this Lease except such
obligations and liabilities which arise or accrue prior to such termination.
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ARTICLE VII
Rights of Parties Holding Prior Interests
7.1 Lease Subordinate.
7.1.1 Upon request of Landlord or its mortgagees or any ground
lessor, Tenant shall, within ten (10) days, deliver a recordable instrument
subordinating its rights under this Lease (each, a "Subordination") to: (a) all
ground leases or underlying leases which may now exist or hereafter be executed
affecting the Building or the Lot, or both, and (b) the lien of any mortgage
which may now exist or hereafter be executed in any amount for which the
Building, the Lot, ground leases or underlying leases, or Landlord's interest or
estate in any of said items is specified as security. Notwithstanding the
foregoing, Landlord shall have the right to subordinate or cause to be
subordinated any such ground leases or underlying leases or any such liens to
this Lease. Landlord shall request from all mortgagees of Landlord's leasehold
interest a so-called non-disturbance agreement for Tenant. Landlord shall
obtain from the current mortgagees of Landlord's leasehold interest
Subordination of Mortgage Agreements in the forms attached hereto as Exhibit F.
Tenant shall be required to deliver a Subordination to a mortgagee or ground
lessor which holds an interest which is not otherwise superior to this Lease
only if such future mortgagee or ground lessor provides Tenant with a written
instrument acknowledging that Tenant's quiet enjoyment shall not be disturbed
unless Tenant fails to perform its obligations or this Lease is otherwise
terminated in accordance with its terms.
7.1.2 If any ground lease or underlying lease terminates for any
reason or any mortgage is foreclosed or a conveyance in lieu of foreclosure with
respect to any such mortgage is made for any reason, and the successor in
interest to Landlord shall elect or be required under the terms of any
non-disturbance agreement to recognize this Lease, then Tenant shall attorn to
and become the tenant of such successor.
7.1.3 Tenant shall within ten (10) days of receipt thereof execute
and deliver, upon demand by Landlord and in the form requested by Landlord, any
additional documents evidencing the priority or subordination of this Lease with
respect to any such ground leases or underlying leases or the lien of any such
mortgage.
7.2 Rights of Holder of Mortgage to Notice of Defaults by Landlord and to
Cure Same. No act or failure to act on the part of Landlord which would
entitle Tenant under the terms of this Lease, or by law, to be relieved of
Tenant's obligations hereunder or to terminate this Lease, shall result in a
release or termination of such obligation or a termination of this Lease unless
(i) Tenant shall have first given notice of Landlord's act
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or failure to act to Landlord's mortgagees of record, if any, specifying the act
or failure to act on the part of Landlord which could or would give basis to
Tenant's rights, and (ii) such mortgagees, after receipt of such notice, have
failed or refused to correct or cure the condition complained of within a
reasonable time thereafter; but nothing contained in this Section 7.2 shall be
deemed to impose any obligation on any such mortgagees to correct or cure any
condition. "Reasonable time" as used above means and includes a reasonable time
to obtain possession of the mortgaged premises if the mortgagee elects to do so
and a reasonable time to correct or cure the condition if such condition is
determined to exist.
7.3 Modification for Lender. If, in connection with obtaining
construction, interim, permanent financing or refinancing for the Building, the
lender shall request reasonable modifications in this Lease as a condition to
such financing or refinancing, Tenant shall not unreasonably withhold, delay or
defer its consent thereto, provided that such modifications do not increase the
obligations of Tenant hereunder or adversely affect the leasehold interest
created hereby or Tenant's rights hereunder.
ARTICLE VIII
Default
8.1 Events of Default.
8.1.1 The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(a) The failure by Tenant to make any payment of Rent or any other
payment required hereunder, as and when due, where such failure shall
continue for a period of five (5) days after notice thereof from
Landlord to Tenant.
(b) The vacating or abandonment of the Premises by Tenant.
(c) The failure by Tenant to observe or perform any of the express or
implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in clauses (a) and (b)
above, where such failure shall continue for a period of more than
thirty (30) days after notice thereof from Landlord to Tenant;
provided, further, that if the nature of Tenant's default is such that
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more than thirty (30) days are reasonably required for its cure,
thenTenant shall not be deemed to be in default if Tenant shall
commence such cure within said ten day period and thereafter
diligently prosecute such cure to completion, which completion shall
occur not later than ninety (90) days from the date of such notice
from Landlord.
(d) The failure by Tenant or any guarantor of any of Tenant's
obligations under this Lease to pay its debts as they become due, or
Tenant or any such guarantor becoming insolvent, filing or having
filed against it a petition under any chapter of the United States
Bankruptcy Code, 11 U.S.C. Section 101 et seq. (or any similar
petition under any applicable insolvency law), proposing any
dissolution, liquidation, composition, financial reorganization or
recapitalization with creditors, making an assignment or trust
mortgage for the benefit of creditors, or if a receiver, trustee,
custodian or similar agent is appointed or takes possession with
respect to any property or business of Tenant or such guarantor.
(e) Attachment, execution, or other judicial seizure of all or
substantially all of Tenant's assets, or this leasehold, or any other
voluntary or involuntary encumbrance of Tenant's leasehold interest
hereunder.
8.1.2 In the event of any such default by Tenant, whether or not the
Term shall have begun, in addition to any other remedies available to Landlord
at law or in equity, Landlord shall have the immediate option, or the option at
any time while such default exists and without further notice, to terminate
this Lease and all rights of Tenant hereunder; and Tenant shall then quit and
surrender the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided.
8.2 Damages.
8.2.1 If this Lease is terminated under any of the provisions
contained in Section 8.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant shall pay forthwith to Landlord, as compensation,
the excess of the total Rent reserved for the residue of the stated Term over
the rental value of the Premises for said residue of the stated Term. As an
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additional and cumulative obligation after any such ending, Tenant shall pay
punctually to Landlord all the sums which Tenant covenants in this Lease to pay
at the same time as if this Lease had not been terminated. In calculating the
amounts to be paid by Tenant under the immediately preceding covenant Tenant
shall be credited with any amount paid to Landlord as compensation as in this
Section 8.2 provided and also with the net proceeds of any rent obtained by
Landlord by reletting the Premises, after deducting all Landlord's reasonable
expenses in connection with such reletting, amortized over the term of the
reletting, including all repossession costs, brokerage commissions, fees for
legal services and expenses of preparing the Premises for such reletting, it
being agreed by Tenant that Landlord may (i) relet the Premises or any part or
parts thereof, for a term or terms which may at Landlord's option be equal to or
less than or exceed the period which would otherwise have constituted the
balance of the stated Term and may grant such concessions and free rent as
Landlord in its sole judgment considers advisable or necessary to relet the
same and (ii) make such alterations, repairs and decorations in the Premises as
Landlord in its sole judgment considers advisable or necessary to relet the
same, and no action of Landlord in accordance with the foregoing or failure to
relet or to collect rent under reletting shall operate or be construed to
release or reduce Tenant's liability as aforesaid.
8.2.2 In lieu of any other damages or indemnity and in lieu of full
recovery by Landlord of all sums payable under all the foregoing provisions of
this Section 8.2. Landlord may by notice to Tenant, at any time after this
Lease is terminated under any of the provisions contained in Section 8.1 or is
otherwise terminated for breach of any obligation of Tenant and before such full
recovery, elect to recover, and Tenant shall thereupon pay, as liquidated
damages, an amount equal to the aggregate of the Base Rent and Additional Rent
accrued under Sections 2.5, 2.6 and 2.7 in the 12 months next prior to such
termination plus the amount of Base Rent and Additional Rent of any kind accrued
and unpaid at the time of termination and less the amount of recovery by
Landlord under the foregoing provision of this Section 8.2 up to the time of
payment of such liquidated damages.
8.2.3 Nothing contained in this Lease shall limit or prejudice the
right of Landlord to prove for and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be provided, whether or
not the amount be greater, equal to, or less than the amount of the loss or
damages referred to above.
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8.2.4 The specific remedies to which Landlord may resort under the
provisions of this Lease are cumulative and are not intended to be exclusive of
any other remedies or means of redress to which it may be entitled lawfully in
case of any breach or threatened breach by Tenant of any provisions of this
Lease. In addition to other remedies provided in this Lease, Landlord shall be
entitled to the restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or provisions of the
Lease or to a decree compelling specific performance of any such covenants,
conditions or provisions.
ARTICLE IX
Assignment and Subletting
9.1 Definitions. For the purposes of this Article IX, "assignment" shall
include the following events: if Tenant is a partnership, a withdrawal or
change (voluntary, involuntary, by operation of law or otherwise) of any of the
general partners thereof, or of general and limited partners owning in the
aggregate fifty percent (50%) or more of the capital and profits of the
partnership, or the dissolution of the partnership; or if Tenant consists of
more than one person, a purported assignment, transfer, mortgage or encumbrance
(voluntary, involuntary, by operation of law or otherwise) from one thereof unto
the other or others thereof; or, if Tenant is a corporation, any dissolution,
merger, consolidation or other reorganization of Tenant or any change in the
ownership (voluntary, involuntary, by operation of law or otherwise) of fifty
percent (50%) or more of its capital stock or fifty percent (50%) or more of its
voting stock from the ownership existing on the date of execution hereof; or,
the sale of fifty percent (50%) or more of the value of the assets of Tenant.
During such time as the stock of Tenant is listed on a nationally recognized
stock exchange, the sale or transfer of Tenant's stock shall not be deemed an
assignment under this Lease.
9.2 Tenant's Request for Consent. Tenant shall not, without prior consent
of Landlord and any mortgagee of Landlord requiring such consent, assign,
mortgage, pledge or otherwise transfer this Lease, make any sublease, or permit
occupancy of the Premises or any part thereof by anyone other than Tenant. In
connection with any request by Tenant for such consent to assignment or
subletting, Tenant shall submit to Landlord (i) the name of the proposed
assignee or subtenant, (ii) such information as to its financial responsibility
and standing as Landlord may reasonably require, and (iii) all of the terms and
provisions upon which the proposed assignment or subletting is to be made.
Notwithstanding the foregoing, Landlord shall not unreasonably withhold its
consent provided that the net worth of the assignee is not less than Five
Million Dollars and 00/100 ($5,000,000.00).
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9.3 Landlord's Option to Cancel. Upon receipt from Tenant of such request
and information, Landlord shall have an option to be exercised within thirty
(30) days after its receipt from Tenant of such request and information if the
request is to assign the Lease or to sublet all of the Premises for the
remainder of the Term, to cancel or terminate this Lease, or, if the request is
to sublet more than forty percent (40%) or the sublease would result in more
than forty percent (40%) of the Premises in the aggregate being sublet, to
cancel and terminate this Lease with respect to such portion for, at Landlord's
election, the term of the proposed sublease or for the balance of the stated
Term, or, if the request is to sublet less than forty percent (40%) or the
sublease would not result in more than forty percent (40%) of the Premises in
the aggregate being sublet, to cancel and terminate this Lease with respect to
such portion for the term of the proposed sublease, in each case as of the date
set forth in Landlord's notice of exercise of such option, which shall be not
less than sixty (60) days nor more than one hundred twenty (120) days following
the giving of such notice. In the event Landlord shall exercise such option,
Tenant shall surrender possession of the entire Premises, or the portion which
is the subject of the option, as the case may be, on the date set forth in such
notice in accordance with the provisions of this Lease relating to surrender of
the Premises at the expiration of the Term. If this Lease shall be cancelled
as to a portion of the Premises only, Rent shall thereafter be abated
proportionately according to the ratio that the number of rentable square feet
in the portion of the space surrendered bears to the Rentable Floor Area of the
Premises.
9.4 Terms of Assignment or Sublease. If Landlord shall not exercise its
option to cancel this Lease pursuant to the foregoing provisions, and Landlord
shall consent to the requested assignment or subletting, the terms and
provisions of such assignment or subletting shall specifically make applicable
to the assignee or sublessee all of the provisions of this Article IX so that
Landlord shall have against the assignee or sublessee all rights with respect to
any further assignment and subletting which are set forth herein; no assignment
or subletting shall affect the continuing primary liability of Tenant (which,
following assignment, shall be joint and several with assignee); no consent to
any of the foregoing in a specific instance shall operate as a waiver in a
subsequent instance; and no assignment shall be binding upon Landlord or any of
Landlord's mortgagees, unless Tenant shall deliver to Landlord an instrument in
recordable form which contains a covenant of assumption by the assignee running
to Landlord and all persons claiming by, through or under Landlord, but the
failure or refusal of the assignee to execute such instrument of assumption
shall not release or discharge assignee from its liability as Tenant hereunder.
If Landlord
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shall not exercise its option to cancel this Lease pursuant to the foregoing
provisions, Landlord shall be entitled to receive one hundred percent (100%) of
all amounts received by Tenant in excess of the Base Rent and Additional Rent
reserved in this Lease applicable to the space being so assigned or sublet.
9.5 Provisions in Sublease or Assignment. Tenant shall include in each
permitted assignment, sublease, license, concession or other agreement for use
or occupancy of the Premises provisions that neither Tenant nor any other person
having an interest in the possession, use or occupancy of the Premises shall
enter into any lease, sublease, license, concession or other agreement for use
of the Premises which provides for rental or other payment for such use or
occupancy based, in whole or in part, on the net income or profits derived any
person or entity from the space leased, occupied or used (other than an amount
based on a fixed percentage or percentages of gross receipts or gross sales).
Any such purported lease, sublease, license, concession or other transfer shall
be absolutely void and ineffective as a conveyance of any right or interest in
the possession, use or occupancy of any part of the Premises.
9.6 Related Expenses. As Additional Rent, Tenant shall reimburse Landlord
promptly for reasonable legal and other expense incurred by Landlord in
connection with any request by Tenant for consent to assignment or subletting,
including fees and expenses payable to any mortgagee.
9.7 No Default by Tenant; Prohibited Assignments. Notwithstanding any
contrary provision of this Lease, Tenant shall have no right to assign this
Lease or sublet all or any portion of the Premises, unless on both (i) the date
on which Tenant notifies Landlord of its intention to enter into any assignment
or sublease and (ii) the date on which such assignment or sublease is to take
effect, Tenant is not in default of any of its obligations under this Lease.
Tenant shall have no right to assign this Lease or sublet all or any portion of
the Premises to government agencies, current tenants in the Building, or any
tenants with whom Landlord shall have negotiated in the six months immediately
preceding such attempted assignment or subletting.
ARTICLE X
Miscellaneous
10.1 Headings; Recordation; Consent or Approval; Notices; Bind and Inure;
"Including"; "Laws".
10.1.1 The titles of the Articles and Sections are for convenience
only and are not to be considered in construing this Lease.
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10.1.2 Tenant agrees not to record this Lease, but upon request of
either party both parties shall execute and deliver a notice of this Lease in
form appropriate for recording or registration, and if this Lease is terminated
before the Term expires, an instrument in such form acknowledging the date of
termination.
10.1.3 Any notice, approval, consent, request or election given or
made pursuant to this Lease shall be in writing. Communications and payments
shall be addressed if to Landlord at Landlord's Original Address or at such
other address or addresses as may have been specified by prior notice to Tenant,
with a copy to Koll Management Services, 60 State Street, Boston, Massachusetts
02109; and if to Tenant, at Tenant's Original Address or at such other place as
may have been specified by prior notice to Landlord. Any communication so
addressed shall be deemed duly given when delivered by hand, one day after being
sent by a guaranteed one-day delivery service, or three (3) days after being
mailed by registered or certified mail, return receipt requested. If Landlord
by notice to Tenant at any time designates some other person to receive payments
or notices, all payments or notices thereafter by Tenant shall be paid or given
to the person designated until notice to the contrary is received by Tenant from
Landlord.
10.1.4 The obligations of this Lease shall run with the land, and
this Lease shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that only the original
Landlord named herein shall be liable for obligations accruing before the
beginning of the Term, and thereafter the original Landlord named herein and
each successive owner of the Premises shall be liable only for obligations
accruing during the period of their respective ownership.
10.1.5 As used in this Lease, any list of one or more items preceded
by the words "including" or "include" shall not be deemed limited to the stated
items, but shall be deemed without limitation.
10.1.6 In the event of the imposition by law of restrictions on the
use or consumption of energy or other utilities during the Term, both Landlord
and Tenant shall be bound thereby. In the event of a difference in
interpretation of any law between Landlord and Tenant, the interpretation of
Landlord shall prevail, and Landlord shall have the right to enforce compliance,
including the right of entry into the Premises to effect compliance.
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10.1.7 As used in this Lease, the word "law" shall be deemed to mean
all applicable provisions of law, including federal, state, county and city
laws, ordinances and regulations, building codes, police, fire and sanitary
regulations, and any other governmental, quasi-governmental or municipal
regulations that affect the subject matter of the Lease provision in which the
word "law" is used.
10.2 Landlord's Failure to Enforce. The failure of Landlord to seek
redress for violation of, or to insist upon strict performance of, any covenant
or condition of this Lease, or with respect to such failure of Landlord to
enforce any of the Rules and Regulations, whether heretofore or hereafter
adopted by Landlord, shall not be deemed a waiver of such violation nor prevent
a subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation, nor shall the failure of
Landlord to enforce any of said Rules and Regulations against any other tenant
of the Building be deemed a waiver of any such Rule or Regulation. The receipt
by Landlord of Base Rent or Additional Rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. No
provision of this Lease shall be deemed to have been waived by Landlord, or by
Tenant, unless such waiver be in writing signed by the party to be charged. No
consent or waiver, express or implied by Landlord or Tenant, to or of any breach
of any agreement or duty shall be construed as a waiver or consent to or of any
other breach of the same or any other agreement or duty.
10.3 Acceptance of Partial Payments of Rent; Delivery of Keys. No
acceptance by Landlord of a lesser sum than the Base Rent or Additional Rent
then due shall be deemed to be other than on account of the earliest
installment of such Rent due, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as Rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided. The delivery of keys to any
employee of Landlord or to Landlord's agent or any employee thereof shall not
operate as a termination of this Lease or surrender of the Premises.
10.4 Partial Invalidity. If any provision of this Lease, or the
application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable shall not be affected thereby, and each provision of
this Lease shall be valid and enforceable to the fullest extent permitted by
law.
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10.5 Landlord's Option to Cure. If Tenant shall at any time default in
the performance of any obligation under this Lease, Landlord shall have the
right, but shall not be obligated, to enter upon the Premises and to perform
such obligation, notwithstanding the fact that no specific provision for such
substituted performance by Landlord is made in this Lease with respect to such
default. In performing such obligation, Landlord may make any payment of money
or perform any other act. All sums so paid by Landlord (together with interest
at the Default Rate as hereinafter defined), and all necessary incidental costs
and expenses in connection with the performance of any such act by Landlord,
shall be deemed to be Additional Rent under this Lease and shall be payable to
Landlord immediately on demand. Landlord may exercise the foregoing rights
without waiving any other of its rights or releasing Tenant from any of its
obligations under this Lease.
10.6 Tenant's Estoppel Certificate and Financial Statements.
10.6.1 Tenant agrees from time to time, upon not less than ten (10)
days prior request by Landlord, to execute, acknowledge and deliver to Landlord
a statement, in a form satisfactory to Landlord and the mortgagees and/or ground
lessor of Landlord, certifying that this Lease is unmodified and in full force
and effect and that Tenant has no defenses, offsets or counterclaims against
its obligations to pay Base Rent and Additional Rent and to perform its other
covenants under this Lease and that there are no uncured defaults of Landlord or
Tenant under this Lease (or if there have been any modifications, that the same
is in full force and effect as modified and stating the modifications and, if
there are any defenses, offsets, counterclaims or defaults, setting them forth
in reasonable detail), and the dates to which the Base Rent, Additional Rent and
other charges have been paid. Any such statement delivered pursuant to this
Section 10.6 may be relied upon by a prospective purchaser, mortgagee or ground
lessor of the Premises or any prospective assignee of any mortgagee of the
Premises. Upon request, Landlord shall execute and deliver to Tenant a similar
statement.
10.6.2 Tenant's failure to deliver such statement within such time
shall be conclusive upon Tenant (a) that this Lease is in full force and
effect, without modification except as may be represented by Landlord, (b) that
there are no uncured defaults in Landlord's performance, and (c) that not more
than one month's rent has been paid in advance.
10.6.3 Tenant further agrees, from time to time, upon not less than
ten (10) days prior request by Landlord, to deliver to Landlord certified
financial statements and related information concerning Tenant's financial
status.
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10.7 Waiver of Subrogation. Any insurance carried by either party with
respect to the Premises or property therein or occurrences thereon shall include
a clause or endorsement denying to the insurer rights of subrogation against the
other party to the extent rights have been waived by the insured prior to occur-
rence of injury or loss. Each party, notwithstanding any provisions of this
Lease to the contrary, hereby waives any rights of recovery against the other
for injury or loss due to hazards covered by such insurance to the extent of the
indemnification received thereunder or which would have been covered had the
insurance required hereunder been maintained.
10.8 All Agreements Contained. This Lease contains all of the agreements
of the parties with respect to the subject matter thereof and supersedes all
prior dealings between them with respect to such subject matter.
10.9 Brokerage. The parties recognize that the brokers who negotiated
this Lease are the brokers whose names are stated in Section 1.1. Tenant shall
be solely responsible for the payment of the agreed upon brokerage commissions
to said brokers, and Landlord shall have no responsibility therefor. Tenant
shall pay the brokerage commissions to said brokers in the amount of $53,075.50,
which is based on $6.50 per square foot, upon the full execution and delivery of
this Lease, and shall submit to Landlord verification that such payment has
been made. As part of the consideration for the granting of this Lease, Tenant
represents and warrants to Landlord that to Tenant's knowledge no other broker,
agent or finder negotiated or was instrumental in negotiating or consummating
this Lease and that Tenant knows of no other real estate broker, agent or finder
who is, or might be, entitled to a commission in connection with this Lease.
Any broker, agent or finder of Tenant whom Tenant has failed to disclose herein
shall be paid by Tenant. Tenant shall hold Landlord harmless from all damages
and indemnify Landlord for all said damage paid or incurred by Landlord
resulting from any claims that may be asserted against Landlord by any broker,
agent or finder undisclosed by Tenant herein.
10.10 Submission Not An Option. The submission of this Lease or a summary
of some or all of its provisions for examination does not constitute a
reservation of or option for the Premises or an offer to lease, end it is not
effective as a lease or otherwise until the execution by and delivery to both
Landlord and Tenant.
10.11 Applicable Law. This Lease, and the rights and obligations of the
parties hereto, shall be construed and enforced in accordance with the
substantive law of the Commonwealth of Massachusetts, without giving effect to
the conflicts or choice of law provisions of Massachusetts or any other
jurisdiction.
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10.12 Massachusetts Jurisdiction. With respect to any matter arising out
of or connected with this Lease, Tenant submits to the jurisdiction of the
federal and state courts within the Commonwealth of Massachusetts.
10.13 Waiver of Jury Trial. LANDLORD AND TENANT HEREBY WAIVE TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
HERETO AGAINST THE OTHER, ON OR IN RESPECT TO ANY MATTER WHATSOEVER ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND
TENANT HEREUNDER, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR CLAIM OF
INJURY OR DAMAGES.
10.14 Holdover. Should Tenant hold over in occupancy of the Premises
after the expiration of the Term of this Lease, Tenant shall become a tenant at
sufferance only, at a rental rate equal to one hundred fifty (150%) of the Base
Rent rate in effect at the end of the Term, and otherwise subject to all the
terms, covenants and conditions herein specified, so far as applicable.
Acceptance by Landlord of Rent after expiration of the Term or earlier
termination of the Lease shall not constitute consent to a holdover hereunder or
result in a renewal or extension. If Tenant fails to surrender the Premises
upon the expiration of the Term or earlier termination despite demand by
Landlord to do so, Tenant shall be liable for all damages sustained by Landlord
on account of such holding over and shall indemnify and hold Landlord harmless
from all loss or liability, including any claim made by any succeeding tenant
founded on or resulting from such failure to surrender.
10.15 Surrender of Premises. The voluntary or other surrender of this
Lease by Tenant or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord, operate as an assignment to it of any or all
subleases or subtenancies.
10.16 Late Payment. All covenants and agreements to be performed by
Tenant under any provisions of this Lease shall be performed by Tenant, at
Tenant's sole cost and expense, and without any abatement of Rent. Tenant
acknowledges that the late payment by Tenant to Landlord of any sums due under
this Lease will cause Landlord to incur costs not contemplated by this Lease,
the exact amount of such costs being impractical to fix. Such costs include
processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of the note secured by any encumbrance covering the
Premises or the Building of which the Premises are a part. Therefore, if Tenant
shall fail to pay any installment of Rent on or before the date when due, or if
Tenant shall fail to pay any other sum of money due hereunder and such failure
shall continue for ten (10) days after notice thereof by Landlord, Tenant shall
pay to Landlord the greater of: (a) five percent (5%) of the overdue amount; or
(b) interest on such overdue amount at an annual rate equal to
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the prime rate announced from time to time by Chase Manhattan Bank at its main
office in New York, New York, plus three (3) percentage points (the "Default
Rate"), calculated from the due date of the overdue amount until the date of
payment to Landlord, provided that such interest rate shall not exceed the
highest rate permitted by Massachusetts law. Landlord's acceptance or any late
charge or interest shall not constitute a waiver of Tenant's default with
respect to the overdue amount or prevent Landlord from exercising any of the
other rights and remedies available to Landlord under this Lease or any law now
or hereafter in effect.
10.17 Time. Time is of the essence with respect to the performance of
every provision of this Lease in which time or performance is a factor.
10.18 Harmony. Tenant agrees that with respect to all work of any nature
performed during the Term for Tenant, whether related to Leasehold Improvements,
Alterations or any other type or manner of work, Tenant and Tenant's agents,
contractors, workers, mechanics, suppliers and invitees shall work in harmony
with Landlord and with other tenants and occupants of the Building, and such
other contractors, workers, mechanics, suppliers and invitees as shall be
working thereon or thereat from time to time prior to or during the Term. If
at any time the presence of Tenant's agents, contractors, workers, mechanics,
suppliers and/or invitees shall cause or threaten to cause disharmony or
otherwise interfere with the orderly operation of other businesses then in the
Building, Landlord shall have the right upon written notice to Tenant, to order
Tenant to cease all work on the Premises, in which event all work then in
progress shall be halted and shall not be recommenced until and unless the
conflict(s) which led to Landlord's delivering such notice to Tenant shall have
been resolved.
10.19 Limitation On Liability. The obligations of Landlord under this
Lease do not constitute personal obligations of the Landlord or trustees,
partners, directors, officers or shareholders of Landlord, and Tenant shall not
seek recourse against the Landlord or trustees, individual partners, directors,
officers or shareholders of Landlord or any of their personal assets for
satisfaction of any liability in respect to this Lease, except for Landlord's
interest in the Property. Unless a court determines that Landlord has acted in
bad faith, Tenant shall have no claim, and hereby waives the right to any claim,
against Landlord for money damages by reason of any refusal, withholding or
delaying by Landlord of any consent, approval or statement of satisfaction, and
in such event, Tenant's only remedies therefor shall be an action for specific
performance, injunction or declaratory judgment to enforce any such requirement.
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10.20 Authority. If Tenant executes this Lease as a corporation, then
Tenant represents and warrants that the individuals executing this Lease on
Tenant's behalf are duly authorized to execute and deliver this Lease on its
behalf in accordance with a duly adopted resolution of the board of directors of
Tenant, a copy of which is to be delivered to Landlord on execution hereof, and
in accordance with the by-laws of Tenant and that this Lease is binding upon
Tenant in accordance with its terms. If Tenant executes this Lease as a
partnership, then Tenant and the persons executing this Lease on behalf of
Tenant represent and warrant that the individuals executing this Lease on
Tenant's behalf are general partners of the partnership, duly authorized to
execute and deliver this Lease on its behalf in accordance with the terms of
the partnership agreement, a copy of which is to be delivered to Landlord on
execution hereof, and that this Lease is binding upon Tenant in accordance with
its terms.
EXECUTED as a sealed instrument in two or more counterparts the day and
year first above written.
LANDLORD: TRUSTEES OF 60 STATE
STREET TRUST
By: John A. Pirovano
-----------------------------
John A. Pirovano, as Trustee
of 60 State Street Trust,
for self and Co-Trustee,
but not individually
TENANT: HPSC, INC.
By: John Everets, Jr.
--------------------------
its President
hereunto duly authorized
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EXHIBIT A
Tenant's Floor Plan
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EXHIBIT B
Description of Lot
Attached to and made part of Lease
dated March 8, 1994
Between
Trustees of 60 State Street Trust, Landlord
and
HPSC, Inc., Tenant
The land in Boston, Suffolk County, Massachusetts, shown on a plan entitled
"Plan of Land Showing Area to be Acquired, Boston, Mass., dated October 13,
1970, as revised to May 11, 1973, and drawn by Harry Feldman, Inc., Engineers
and Surveyors, 112 Shawmut Avenue, Boston, Massachusetts," which plan is
recorded with said Deeds in Book 8691, Page 596, and bounded and described as
follows:
Beginning at the southeasterly corner of the intersection of easterly
sideline of Congress Street and the southerly sideline of Faneuil Hall Square
and running S82-27-55E by Faneuil Hall Square, a distance of 112.53 feet to an
angle;
thence turning and running N82-24-O6E by Faneuil Hall Square, a distance of
106.32 to an angle;
thence turning and running S1O-43-40E by Faneuil Hall Square. a distance of 2.00
feet to the corner of the 5-story brick building known as Faneuil Hall Square,
now or formerly of Charles G. Crones;
thence running S1O-43-40E by the westerly face of the said 5-story brick
building, a distance of 67.27 feet to an angle;
thence turning and running N79-40-00E by said land of Crones, a distance of
61.81 feet to a point on the westerly sideline of Merchants Row, subject to the
existing southerly face of the building at numbers 28-36 Merchants Row as shown
on sketch "C" of said Plan;
thence turning and running S23-15-42E by the said westerly line of Merchants
Row, a distance of 30.42 fact to an angle;
thence running S23-16-57E by said line or Merchants Row, a distance of 17.50
feet to an angle:
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thence turning and running S83-31-29W by land now or formerly of Nathan R.
Miller Properties, Ltd.-5th ("Miller"), a distance of 73.22 feet to an angle;
thence turning and running NO6-57-30W by said land of Miller, a distance of 8.50
feet to an angle;
thence turning and running S88-41-40W by land of Miller, a distance of 30.30
feet to an angle;
thence turning and running S1O-24-24E by said land of Miller, a distance of
32.40 feet to an angle;
thence running S1O-51-43E by a passageway shown on said land, a distance of
21.61 feet to an angle;
thence turning and running N83-10-33E by said passageway, a distance of 4.91
feet to an angle;
thence turning and running SO8-52-18E by said passageway, a distance of 25.03
feet to an angle:
thence turning and running N83-22-26E by said passageway, a distance of 31.47
feet to an angle:
thence turning and running SO6-39-O2E by said passageway, a distance of 20.89
feet to an angle;
thence turning and running N80-55-44E by said passageway, a distance of 4.03
feet to an angle;
thence turning and running SO6-35-40E by said passageway, a distance of 12.72
feet to an angle;
thence running S11-39-14E by said passageway, a distance of 36.92 feet to a
point, said point being on the northerly sideline of State Street;
thence turning and running S78-29-12W by said northerly sideline State Street, a
distance of 4.10 feet to an angle;
thence running S78-46-35W by State Street, 33.51 feet to an angle;
thence turning and running S78-46-38W by State Street, a distance of 83.49 feet
to an angle;
thence running S78-45-36W by State Street, a distance of 76.04 feet to an angle;
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thence running S78-48-57W by State Street. a distance of 15.84 feet to the point
on the intersection of sidelines of State and Congress Streets;
thence turning and running N12-11-O9W by the easterly sideline of Congress
Street, a distance of 292.92 feet to the point of beginning.
The above-described parcel contains 56,331 square feet (1.293 acres) as
shown on the Plan.
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EXHIBIT C
Landlord's Services
Attached to and made part of Lease
dated March 8, 1994
Between
Trustees of 60 State Street Trust, Landlord
and
HPSC, Inc., Tenant
I. CLEANING
A. Office Area.
Daily: Monday through Friday, inclusive, holidays excepted.
1. Empty and clean all waste receptacles and ashtrays and remove
waste material from the Premises: wash receptacles as necessary.
2. Sweep and dust mop all uncarpeted areas using a dust-treated
mop.
3. Vacuum all rugs and carpeted areas.
4. Hand dust and wipe clean with treated cloths all horizontal
surfaces including furniture, office equipment, Window sills,
door ledges, chair rails, and convector tops, within normal reach.
5. Wash clean all water fountains.
6. Remove and dust under all desk equipment and telephones and
replace same.
7. Wipe clean all brass and other bright work.
8. Hand dust all grill work within normal reach.
9. Upon completion of cleaning, all lights will be turned off and
doors locked, leaving the Premises in an orderly condition.
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Weekly:
1. Dust coat racks and the like.
2. Remove all finger marks from private entrance doors, switches and
doorways.
Quarterly: Render high dusting not reached in daily cleaning to include:
1. Dusting all pictures, frames, charts, graphs and similar wall
hangings.
2. Dusting all vertical surfaces, such as walls, partitions, doors
and ducts.
3. Dusting of all pipes, ducts and high moldings.
4. Dusting of all venetian blinds.
B. Lavatories.
Daily: Monday through Friday, inclusive, holidays excepted.
1. Sweep and damp mop floors.
2. Clean all mirrors, powder shelves, dispensers and receptacles,
bright work, flushometers, piping, and toilet seat hinges.
3. Wash both sides of all toilet seats.
4. Wash all basins, bowls and urinals.
5. Dust and clean all powder room fixtures.
6. Empty and clean paper towel and sanitary disposal receptacles.
7. Remove waste paper and refuse.
8. Refill tissue holders, soap dispensers, towel dispensers, vending
sanitary dispensers; materials to be furnished by Landlord.
9. A sanitizing solution will be used in all lavatory cleaning.
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Monthly:
1. Machine scrub lavatory floors.
2. Wash all partitions and tile walls in lavatories.
C. Main Lobby, Elevators, Building Exterior and Corridors.
Daily: Monday through Friday, inclusive, inclusive, holidays excepted.
1. Sweep and wash all floors.
2. Wash all rubber mats.
3. Clean elevators, wash or vacuum floors, wipe down and doors.
4. Spot clean any metal work inside lobby.
5. Spot clean any metal work surrounding Building Entrance doors.
D. Window Cleaning. Windows of exterior walls will be washed at least
three times per year except when rendered impracticable by
inclement weather.
E. Additional Services. Tenant requiring services in excess of those
described above shall request same through Landlord at Tenant's
expense.
II. HEATING, VENTILATING, AIR CONDITIONING
A. Landlord shall furnish space heating and cooling as normal seasonal
changes may require to provide reasonably comfortable space temperature and
ventilation for occupants of the Premises under normal business operation,
daily from 8:00 a.m. to 6:00 p.m. (Saturdays to 1:00 p.m.), Sundays and
holidays excepted.
If Tenant shall require air conditioning or heating or ventilation outside
the hours and days above specified, Landlord shall furnish such service at
Tenant's expense. Currently, the charges for additional hours during the
winter months (October-March) is $55.00 per hour and the charge for
additional hours during the summer months (April-September) is $75.00 per
hour. Such charges are subject to change during the Term of the Lease.
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B. The air conditioning system is based upon an occupancy of not more
than one person per 150 square feet of usable floor area, and upon a
combined lighting and standard electrical load not to exceed 3.5 watts per
square foot of usable area. In the event Tenant exceeds this condition or
introduces onto the Premises equipment which overloads system, and/or in
any other way causes the system not adequately to perform their proper
functions, supplementary systems, may at Landlord's option be provided by
Landlord at Tenant's expense.
III. WATER
A. Landlord shall furnish cold water at temperatures supplied by the City
of Boston water mains for drinking, lavatory, kitchen, restaurant and
toilet purposes and hot water for lavatory purposes only from regular
building supply at prevailing temperatures; provided, however, that
Landlord may, at its expense, install a meter or meters to measure the
water supplied to any kitchen (including dishwashing) and restaurant areas
in the Premises, in which case Tenant shall, upon Landlord's request,
reimburse Landlord for the cost of the water (including heating thereof)
consumed in such areas and the sewer use charges resulting therefrom.
IV. ELEVATORS
A. The passenger elevator system shall be in automatic operation and
service to the Premises shall be available to Tenant at all times. The use
of the service elevator will have to be scheduled with the Landlord and
coordinated with the needs of the other tenants.
V. ELECTRICAL SERVICE
A. Landlord shall provide electric power for up to 2.0 watts per square
foot of usable floor area for lighting plus 1.0 watts per square foot of
usable floor area for office machines through standard receptacles for the
typical office space.
B. Landlord, at its option, may require separate metering at Tenant's
expense and direct billing to Tenant for the electric power required for
any special equipment (such as computers and reproduction equipment) that
require either 3-phase electric power or any voltage other than
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120. Landlord will furnish and install at Tenant's expense all replacement
lighting tubes, lamps, and ballasts required by Tenant. Landlord will
clean lighting fixtures on a regularly scheduled basis at Tenant's expense.
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EXHIBIT D
Work Letter Agreement
To induce Tenant to enter into the Lease and in consideration of the mutual
covenants hereinafter contained, Landlord and Tenant mutually agree as follows:
1. Plans and Specifications.
(a) Landlord has prepared, at Tenant's expense, Preliminary Plan entitled
93115-F1 dated 12/9/93 for improvements of the Premises, to be installed by
Landlord. If the Preliminary Plans are not in sufficient detail for
Landlord's contractor to undertake construction within the Premises, then
the Landlord shall prepare, at Tenant's expense, the Final Plans in
accordance with Section 3.1 of the Lease. In the event of a conflict
between the Preliminary Plans and the Final Plans, the Final Plans shall
control.
(b) All working drawings for HVAC, electrical, structural, or other
building systems required for Landlord's contractor to construct the
Leasehold Improvements in accordance with the Preliminary Plans and the
Final Plans shall be prepared by Landlord's contractor at Tenant's expense.
(c) Landlord shall not be required to furnish professional interior design
services to Tenant and shall not be required to pay for professional
interior design services engaged by Tenant. Further, Tenant's interior
furnishings, i.e., specification, supply and installation of furniture,
furnishings, and moveable equipment, shall be the sole responsibility of
Tenant. All of Tenant's installation of interior furnishings and equipment
shall be coordinated with any work being performed by Landlord in the
Premises or elsewhere in the Building in such manner as to maintain
harmonious labor relations and not damage the Building or the Premises or
interfere with Building operations; provided, however, that without
Landlord's prior consent, Tenant may not install any interior furnishings
in advance of the date on which the Premises are Ready for Occupancy.
Notwithstanding the foregoing, Tenant may install in advance of the date
the Premises are Ready for Occupancy, computer and communications equipment
so long as Tenant notifies Landlord of the intent to do so, coordinates the
schedule for same with Landlord's Construction Representative, and such
installation does not interfere with the work being performed by Landlord
in the Premises or elsewhere in the Building.
-54-
<PAGE>
2. Construction. Tenant shall contract directly with Landlord's
construction manager and Landlord's contractor for the construction of the
Leasehold Improvements. Thereafter, at Tenant's expense, Landlord's
contractor (and its subcontractors) shall construct, and Landlord's
construction manager shall supervise the construction of, the Leasehold
Improvements in accordance with the Preliminary Plans and the Final Plans,
unless a Change Order is made in accordance with Section 3 of this
Agreement, subject to delays as described in Section 4 of this Agreement
and delays due to governmental regulation, unusual scarcity of or inability
to obtain labor or materials, labor difficulties, casualty or other causes
reasonably beyond Landlord's control.
3. Change Orders. In the event Tenant desires to have the Leasehold
Improvements constructed other than as set forth in the Preliminary Plans
and the Final Plans, no different work shall be done unless Landlord's
contractor and Tenant shall first execute a written agreement concerning
the scope of the revised work or materials desired by Tenant, the cost of
such work or materials and the effect of any resulting delay (each, a
"Change Order"). Further, a Change Order shall be required and executed in
the event Tenant selects materials or quantities that exceed the allowances
specified in the Final Plans. All costs for labor and materials resulting
from a Change Order, including the cost of all plans prepared pursuant
thereto, plus a fee equal to fifteen percent (15%) of such costs, shall be
billed directly to Tenant by Landlord upon completion of construction of
the Leasehold Improvements, and Tenant shall pay the amount of such bill as
Additional Rent within 30 days after receipt thereof. All Work required
pursuant to a Change Order shall be undertaken by Landlord's contractor or
its subcontractor and not by Tenant.
4. Tenant's Delays. If Landlord's contractor is required to work beyond
the Scheduled Commencement Date as a result of Tenant-caused delays (which
shall include delays caused by Tenant's decision to use materials, finishes
or installations other than those set forth in the Final Plans or Tenant's
request for any change in the Preliminary Plan), then Tenant shall be
responsible for and shall pay to Landlord upon completion of the Leasehold
Improvements the additional supervisory and general conditions costs
incurred by Landlord.
6. Reimbursement. With respect to the amounts which Tenant is obligated
to pay to Landlord for Landlord's cost of the Preliminary Plans, Final
Plans, and all working drawings, the foregoing to include, without
limitation, all architectural and engineering fees relating to the
Leasehold Improvements, Tenant shall pay the amounts within thirty (30)
days of receipt of a bill therefor. With respect to the amounts which
Tenant is obligated to pay to Landlord's contractor and construction
manager (such construction management fee to be equal to two and one-half
percent (2-1/2%) of the cost incurred pursuant to the prior
-55-
<PAGE>
sentence plus the costs for construction of the Leasehold Improvements
including, without limitation, labor and materials), Tenant shall make such
payment in accordance with its contract with such parties or, if not
specified in such contract, then within thirty (30) days of receipt of a
bill therefor.
-56-
<PAGE>
EXHIBIT E
Rights of Other Tenants of
60 State Street to Lease Space
on Floors 24 and 35
1. Hale and Dorr, which has rights of First Offer and First Refusal.
2. Bay Tower, Inc., which has the right to lease 3,305 square feet on
Floor 34 through April 30, 2030.
3. Cabot Partners, which has the right to lease 10,725 square feet on
Floor 35 through December 31, 2000.
4. Shapiro, Weiss & Co., which has an expansion option for 3,000 - 5,000
square feet of space which may be on Floors 34 and/or 35.
-57-
<PAGE>
Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, NY 10017
EXHIBIT F
Subordination of Mortgage
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
("TIAA") hereby grants this Subordination of Mortgage on the following terms
and conditions.
WHEREAS, ACME-PREMIER REALTY CORP., TRUSTEE UNDER THE SECOND RESTATE
DECLARATION OF TRUST ESTABLISHING FIFTY STATE STREET TRUST dated December 29,
1992 and recorded with the Suffolk Deeds, Book 17950, Page 043/044, (which Trust
was established originally under a Declaration of Trust dated December 29, 1967
and recorded with Suffolk Deeds in Book 8188, Page 137, as amended by Amendment
No. 1, dated as of July 30, 1975, recorded with Suffolk Deeds, Book 8804, Page
632, and restated in a Restated declaration of Trust, dated September 4, 1975,
recorded with Suffolk Deeds, Book 8816, Page 606) ("Ground Lessor") are the
owners in fee simple of those certain premises situate, lying and being in the
City of Boston, County of Suffolk, Commonwealth of Massachusetts, commonly known
as 60 State Street, and as more particularly described in the Ground Lease (the
"Ground Leased Premises"); and
WHEREAS, under the terms of a certain lease dated December 29, 1967
(notice of which was recorded with said Deeds in Book 8188, Page 144), as
amended by instruments dated June 20, 1968, January 7, 1971, July 30, 1975 and
November 26, 1975 (notices of which amendments were recorded with said Deeds in
Book 8209, Page 711; Book 8414, Page 356; Book 8804, Page 606; and Book 8836,
Page 448, respectively), and as affected by Estoppel Certificate and Agreement
dated December 28, 1977 (recorded with said Deeds in Book 9024, Page 244),
ground Lessor did lease, let and demise the Ground Leased Premises to the
Trustees of Cabot, Cabot & Forbes, Co., whose interest under the Ground Lease
was assigned (by assignment dated September 1, 1971 and recorded with said Deeds
in Book 8654, Page 448) to the TRUSTEES OF 60 STATE STREET TRUST (hereinafter
called "Landlord"), for a term of 45 years commencing January 1, 1968 and
continuing to and including December 31, 2012, with four renewal options of 10,
15, 15 and 14 years respectively (all of which were exercised pursuant to two
letters dated respectively December 28, 1977 and March 30, 1990) upon the terms
and conditions herein more particularly set forth; and
-58-
<PAGE>
WHEREAS, TIAA is the owner and holder of four certain mortgages; two dated
December 28, 1977, being Mortgage No. 1 recorded with said Deeds in Bok 9024,
Page 282 and Mortgage No. 2 recorded with said Deeds in Book 9024, Page 321; one
dated August 27, 1979 being Mortgage No. 3 recorded with said Deeds in Book
9266, Page 89; and one dated May 24, 1985 being Mortgage No. 4 recorded with
said Deeds in Book 11621, Page 38; (said Mortgages Nos. 1, 2, 3 and 4 as
modified, supplemented and consolidated of record, together with all documents
setting forth any obligations of Landlord or any beneficiaries of Landlord to
TIAA, are hereinafter referred to as the "TIAA Mortgages"), constituting a
first, second, third and fourth mortgage upon the leasehold estate created by
the Ground Lease and affecting certain adjacent property more particularly
described in the TIAA Mortgages ("Mortgaged Premises"); and
WHEREAS, Landlord has entered into a lease with HPSC, INC. ("Tenant") dated
March 8, 1994, ("Lease") with respect to space located at 60 State Street,
Boston, Massachusetts which space constitutes a portion of the Mortgaged
Premises.
NOW, THEREFORE, in consideration of Tenant entering into the Lease and the sum
of One Dollar ($1.00) and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, TIAA does hereby covenant and
agree that the TIAA Mortgages are and shall remain SUBORDINATE to the said
Lease, it being expressly agreed that the Lease has been, or should be deemed to
have been, executed, delivered and recorded prior to the execution, delivery and
recording of the said TIAA Mortgages.
EXCEPT, HOWEVER, it is nevertheless agreed that the TIAA Mortgages shall be
prior to the Lease as to the following:
(a) The prior right, claim and lien of the said TIAA Mortgages in, to and
upon any award or other compensation heretofore or hereafter to be made
for any taking by eminent domain of any part of the Mortgaged Premises, and
to the right of disposition thereof in accordance with the provisions of
the TIAA Mortgages,
(b) The prior right, claim, lien of the said TIAA Mortgages in, to and
upon any proceeds payable under all policies of fire and rent insurance
upon the Mortgaged Premises and as to the right of disposition thereof in
accordance with the terms of the TIAA Mortgages, and
(c) Any lien, right, power or interest, if any, which may have arisen or
intervened in the period between the recording of the TIAA Mortgages and
the execution of the said Lease, or any lien or judgment which may arise at
any time under the terms of such Lease.
-59-
<PAGE>
Copies of all notices of default from Tenant to Landlord shall be delivered to
TIAA, in the manner set forth in the Lease, at Teachers Insurance and Annuity
Association of America, 730 Third Avenue, New York, New York 10017 Attn:
Northeast Closing Servicing Unit Re: Mortgage No. 000093000, or such other
address as TIAA may specify in writing.
This Subordination may be executed by the undersigned and the Tenant in
counterparts, each of which, taken together, shall be deemed one original.
This Subordination shall inure to the benefit of and shall be binding upon the
undersigned, its successors and assigns.
IN WITNESS WHEREOF, the Subordination has been duly signed and delivered by
the undersigned as of this 8 day of March, 1994.
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: Judith L. King
----------------------------
its Director
TENANT'S AGREEMENT
The undersigned, as Tenant under the Lease herein described, does hereby
accept and agree to the terms of the foregoing Subordination which shall inure
to the benefit of and be binding upon the undersigned and the heirs, executors,
administrators, legal representatives, successors and assigns of the
undersigned.
HPSC, INC.
By: John Everets, Jr.
----------------------------
its President
-60-
<PAGE>
ACKNOWLEDGEMENTS
STATE OF )
) SS:
COUNTY OF )
On this ___ day of March, 1994, before me appeared___________________ to me
personally known, who, being by me duly sworn, did say that he is the
____________________ of HPSC, INC. and that the seal affixed to the foregoing
instrument is the corporate seal of said corporation, and that said instrument
was signed and sealed on behalf of said corporation by authority of its Board of
Directors, and said _________________ acknowledged said instrument to be the
free act and deed of said corporation.
________________________________
, Notary Public
My Commission Expires:
STATE OF )
) SS:
COUNTY OF )
On this ___ day of March, 1994, before me appeared ___________________ to me
personally known, who, being by me duly sworn, did say that he is the
____________________ of HPSC, INC. and that the seal affixed to the foregoing
instrument is the corporate seal of said corporation, and that said instrument
was signed and sealed on behalf of said corporation by authority of its Board of
Directors, and said _________________ acknowledged said instrument to be the
free act and deed of said corporation.
________________________________
, Notary Public
My Commission Expires:
-61-
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF )
On this ___ day of _____________, 1994, before me the undersigned, a Notary
Public in and for said County and State, personally appeared
_____________________ known to me to be the ________________ of TEACHERS
INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, the corporation that executed the
within instrument, and known to me to be the person who executed the within
instrument on behalf of such corporation, and acknowledged to me that such
corporation executed the within instrument pursuant to its bylaws or a
resolution of its board of Trustees.
WITNESS my hand and official seal.
________________________________
, Notary Public
My Commission Expires:
-62-
<PAGE>
Trust Company of the West,
as Trustee of TCW Realty Fund VA
TCW Realty Fund VB
30 Rowes Wharf, Suite 310
Boston, Massachusetts 02110
and
865 South Figueroa Street, Suite 3500
Los Angeles, California 90017-2543
Subordination of Mortgage
TRUST COMPANY OF THE WEST, a California corporation, as Trustee of TCW Realty
Fund VA and TCW Realty Fund VB, a California limited partnership, as tenants in
common ("TCW") hereby grant this Subordination of Mortgage on the following
terms and conditions.
WHEREAS, ACME-PREMIER REALTY CORP., TRUSTEE UNDER THE SECOND RESTATED
DECLARATION OF TRUST ESTABLISHING FIFTY STATE STREET TRUST dated December 29,
1992 and recorded with the Suffolk Deeds, Book 17950, Page 043/044, (which Trust
was established originally under a Declaration of Trust dated December 29, 1967
and recorded with Suffolk Deeds in Book 8188, Page 137, as amended by Amendment
No. 1, dated as of July 30, 1975, recorded with Suffolk Deeds, Book 8804, Page
632, and restated in a Restated Declaration of Trust, dated September 4, 1975,
recorded with Suffolk Deeds, Book 8816, Page 606) ("Ground Lessor") are the
owners in fee simple of those certain premises situate, lying and being in the
City of Boston, County of Suffolk, Commonwealth of Massachusetts, commonly known
as 60 State Street and as more particularly described in the Ground Lease (the
"Ground Leased Premises"); and
WHEREAS, under the terms of a certain lease dated December 29, 1967 (notice of
which was recorded with said Deeds in Book 8188, Page 144), as amended by
instruments dated June 20, 1968, January 7, 1971, July 30, 1975 and November 26,
1975 (notices of which amendments were recorded with said Deeds in Book 8209,
Page 711; Book 8414, Page 356; Book 8804, Page 606; and Book 8836, Page 448,
respectively), and as affected by Estoppel Certificate and Agreement dated
December 28, 1977 (recorded with said Deeds in Book 9024, Page 244), Ground
Lessor did lease, let and demise the Ground Leased Premises to the Trustees of
Cabot, Cabot & Forbes, Co., whose interest under the Ground Lease was assigned
(by assignment dated September 1, 1971 and recorded with said Deeds in Book
8654, Page 448) to the TRUSTEES OF 60 STATE STREET TRUST (hereinafter called
"Landlord"), for a term of 45 years commencing January 1, 1968
-63-
<PAGE>
and continuing to and including December 31, 2012, with four renewal options of
10, 15, 15 and 14 years respectively (all of which were exercised pursuant to
two letters dated respectively December 28, 1977 and March 30, 1990) upon the
terms and conditions herein more particularly set forth; and
WHEREAS, TCW is the owner and holder of that certain Mortgage and Security
Agreement, dated November 1, 1990 and recorded with said Deeds in Book 16688,
Page 1 as amended by a First Comprehensive Amendment Agreement recorded with
said Deeds, and as may be further amended of record (said Mortgage and Security
Agreement as so amended, together with all documents setting forth any
obligations of Landlord and any beneficiaries of Landlord to TCW are referred to
hereinafter as the "TCW Mortgage") upon the leasehold estate created by the
Ground Lease and affecting certain adjacent property more particularly described
in the TCW Mortgage ("Mortgage Premises"); and
WHEREAS, the TCW Mortgage as of the date of the execution of this
Subordination of Mortgage Agreement is subject and subordinate to certain
mortgages held by Teachers Insurance and Annuity Association of America
("TIAA"); two dated December 28, 1977, being Mortgage No. 1 recorded with said
Deeds in Book 9024, Page 282 and Mortgage No. 2 recorded with said Deeds in Book
9024, Page 321; one dated August 27, 1979 being Mortgage No. 3 recorded with
said Deeds in Book 9266, Page 89; and one dated May 24, 1985 being Mortgage No.
4 recorded with said Deeds in Book 11621, Page 38; (said Mortgages Nos. 1, 2, 3
and 4 as modified, supplemented and consolidated of record, together with all
documents setting forth any obligations of Landlord or any beneficiaries of
Landlord to TIAA, are hereinafter referred to as the "TIAA Mortgages"),
constituting a first, second, third and fourth mortgage upon Mortgaged Premises;
and
WHEREAS, Landlord has entered into a lease with HPSC, Inc. ("Tenant") dated
March 8, 1994, ("Lease") with respect to space located at 60 State Street,
Boston, Massachusetts ("Premises") which space constitutes a portion of the
Mortgaged Premises.
NOW, THEREFORE, in consideration of Tenant entering into the Lease and the sum
of One Dollar ($1.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, TCW does hereby covenant and agree
that the TCW Mortgage is and shall remain SUBORDINATE to the said Lease, it
being expressly agreed that the Lease has been, or should be deemed to have
been, executed, delivered and recorded prior to the execution, delivery and
recording of the said TCW Mortgage subject to the rights of TCW hereinafter set
forth.
-64-
<PAGE>
EXCEPT, HOWEVER, it is nevertheless agreed that the TCW Mortgage shall be
prior to the Lease as to the following:
(a) The prior right, claim and lien of the said TCW Mortgage in, to and
upon any award or other compensation heretofore or hereafter to be made for
any taking by eminent domain of any part of the Mortgaged Premises, and to
the right of disposition thereof in accordance with the provisions of the
TCW Mortgage,
(b) The prior right, claim, lien of the said TCW Mortgage in, to and upon
any proceeds payable under all policies of fire and rent insurance upon the
Mortgaged Premises and as to the right of disposition thereof in accordance
with the terms of the the TCW Mortgage, and
(c) Any lien, right, power or interest, if any, which may have arisen or
intervened in the period between the recording of the the TCW Mortgage and
the execution of the said Lease, or any lien or judgment which may arise at
any time under the terms of such Lease.
Notwithstanding any of the foregoing to the contrary, TCW reserves the right
to make the Lease, and all rights, options, liens, or charges created thereby
subject and subordinate to the TCW Mortgage and the liens created thereby and to
all renewals, modifications, consolidations, replacements and extensions
thereof, to the full extent of all amounts secured thereby and interest thereon
from time to time, and Tenant agrees that TCW may at any time, at its elections,
execute and record in the Suffolk County Registry of Deeds a Notice of
Subordination reciting that the Lease is subordinate to the liens of the TCW
Mortgage and from and after the recordation of such Notice of Subordination, the
Lease shall be subject and subordinate to the liens of the TCW Mortgage,
provided that TCW shall have the right at its election to execute and record in
said Deeds a notice withdrawing the Notice of Subordination and reciting that
the TCW Mortgage once again shall be subordinate to the Lease and, upon request,
Tenant shall execute such documents as are necessary to confirm the
subordination of the Lease to the TCW Mortgage or the subordination of the TCW
Mortgage to the Lease, as may be the case. In the event TCW elects to
subordinate the Lease to the TCW Mortgage, the following terms and conditions
shall be applicable:
(a) Tenant agrees that it will attorn to and recognize TCW upon entry on
the Premises for breach or default by Landlord under the TCW Mortgage, any
transferee who acquires the Premises by deed in lieu of foreclosure, and
the successors and assigns of such purchasers as its landlord for the
unexpired balance (and any extensions, if exercised) of the term of the
Lease, upon the same terms and conditions set forth in the Lease.
-65-
<PAGE>
(b) If it should become necessary to foreclose the TCW Mortgage, TCW shall
not terminate the Lease nor join Tenant in summary proceedings so long as
Tenant is not in default under any of the terms, covenants, or conditions
of the Lease.
(c) Tenant agrees that it shall give TCW a copy of each notice of default
delivered to Landlord with respect to any default under the Lease, which
notice shall be delivered to TCW in hand or sent by registered or certified
mail to the address of TCW. Tenant further agrees that if Landlord shall
have failed to cure such default within the time provided for in the Lease
(including any applicable grace periods), then TCW shall have an additional
60 days within which to cure such default or, if such default cannot be
cured within that period, then such additional time as may be necessary to
effect such a cure if within such 60-day period TCW have commenced and are
diligently pursuing the remedies necessary to cure such default (including,
but not limited to, commencement of foreclosure proceedings, if necessary
to effect such cure); and Tenant agrees that the Lease shall not be
terminated while such remedies are being pursued. TCW shall in no event be
obliged to cure a default which is personal to Landlord, and therefore not
reasonably susceptible of cure by TCW.
(d) If TCW shall succeed to the interest of Landlord under the Lease, TCW
shall not be:
(i) liable for any act or omission of any prior landlord (including
Landlord); or
(ii) liable for the return of any security deposits; or
(iii) subject to any offsets or defenses which Tenant might have
against any prior landlord (including Landlord); or
(iv) bound by any rent or additional rent which Tenant might have paid
for more than the current month to any prior landlord (including
Landlord); or
(v) bound by any amendment or modification of the Lease made without
their prior written consent; or
-66-
<PAGE>
(vi) bound by the consent of any prior landlord (including Landlord)
to any assignment or sublease of Tenant's interest in the Lease made
without also obtaining TCW's prior written consent; or
(vii) personally liable for any default under the Lease or any
covenant on its part to be performed thereunder as landlord, it being
acknowledged that Tenant's sole remedy in the event of such default
shall be to proceed against TCW's interest in 60 State Street.
(e) Tenant further acknowledges and agrees:
(i) that the Lease cannot be terminated (either directly or by the
exercise of any option which could lead to termination) or modified in
any of its terms, or consent be given to the release of any party
having liability thereon, by Landlord, without the prior written
consent of TCW, or their successors or assigns, and without such
consent, no rent may be collected or accepted by Landlord more than
one month in advance; and
(ii) that the interest of Landlord in the Lease has been or may be
assigned to TCW for the purposes specified in any lease assignments,
and TCW, its successors or assigns, assume no duty, liability or
obligation under the Lease or any extension or renewal thereof.
Copies of all notices of default from Tenant to Landlord shall be delivered to
TCW, in the manner set forth in the Lease, at TCW Realty Advisors, 30 Rowes
Wharf, Suite 310, Boston, Massachusetts 02110 and TCW Realty Advisors, 865 South
Figueroa Street, Suite 3500, Los Angeles, California 90017-2543, or such other
address as TCW may specify in writing.
This Subordination may be executed by the undersigned and the Tenant in
counterparts, each of which, taken together, shall be deemed one original.
This Subordination shall inure to the benefit of and shall be binding upon the
undersigned, its successors and assigns.
-67-
<PAGE>
IN WITNESS WHEREOF, the Subordination has been duly signed and delivered by
the undersigned as of this 8th day of March, 1994.
TRUST COMPANY OF THE WEST, a
California corporation, as trustee
for TCW REALTY FUND VA, as tenant
in common
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
TCW REALTY FUND VB, a California
limited partnership, as tenant in
common
By: TCW ASSET MANAGEMENT COMPANY,
a California corporation, as
General Partner
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
By: WESTMARK REAL ESTATE INVESTMENT
SERVICES, a California general
partnership, as General Partner
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
-68-
<PAGE>
TENANT'S AGREEMENT
The undersigned, as Tenant under the Lease herein described, does hereby
accept and agree to the terms of the foregoing Subordination which shall inure
to the benefit of and be binding upon the undersigned and the heirs, executors,
administrators, legal representatives, successors and assigns of the
undersigned.
HPSC, INC.
By: /s/ John Everets, Jr
----------------------
John Everets, Jr
its President
hereunto duly authorized
ACKNOWLEDGEMENTS
STATE OF )
)SS:
COUNTY OF )
On this ____ day of March, 1994, before me appeared _________________________
to me personally known, who, being by me duly sworn, did say that he is the
___________________ of HPSC, INC. and that the seal affixed to the foregoing
instrument is the corporate seal of said corporation, and that said instrument
was signed and sealed in behalf of said corporation by authority of its Board of
Directors, and said ___________________ acknowledged said instrument to be the
free act and deed of said corporation.
________________________________
, Notary Public
My Commission Expires:
STATE OF _______________________
______________, ss. ______________, 1994
Then personally appeared the above-named ____________________ as an authorized
signatory of TRUST COMPANY OF THE WEST, a California corporation, as trustee for
TCW REALTY FUND VA and acknowledged the foregoing to be his free act and deed
and the free act and deed of said corporation as trustee, before me,
________________________________
, Notary Public
My Commission Expires:
-69-
<PAGE>
STATE OF _____________________
______________, ss. ______________, 1994
Then personally appeared the above-named ____________________ as an authorized
signatory of TRUST COMPANY OF THE WEST, a California corporation, as trustee for
TCW REALTY FUND VA and acknowledged the foregoing to be his free act and deed
and the free act and deed of said corporation as trustee, before me,
________________________________
, Notary Public
My Commission Expires:
STATE OF _____________________
_____________, ss. _____________, 1994
Then personally appeared the above-named ____________________ as an authorized
signatory of TCW ASSET MANAGEMENT COMPANY, a California corporation and General
Partner of TCW Realty Fund VB, a California limited partnership, and
acknowledged the foregoing to be his free act and deed and the free act and deed
of said corporation and said limited partnership, before me,
________________________________
, Notary Public
My Commission Expires:
STATE OF ____________________
______________, ss. _____________, 1994
Then personally appeared the above-named ____________________ as an authorized
signatory of TCW ASSET MANAGEMENT COMPANY, a California corporation and General
Partner of TCW Realty Fund VB, a California limited partnership, and
acknowledged the foregoing to be his free act and deed and the free act and deed
of said corporation and said limited partnership, before me,
________________________________
, Notary Public
My Commission Expires:
-70-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
_____________, ss. _____________, 1994
Then personally appeared the above-named ___________________, as an authorized
signatory of WESTMARK REAL ESTATE INVESTMENT SERVICES, a California general
partnership which is a General Partner of TCW Realty Fund VB, a California
general partnership, and acknowledged the foregoing to be his free act and deed
and the free act and deed of each of said general partnerships, before me,
________________________________
, Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
_____________, ss. _____________, 1994
Then personally appeared the above-named ___________________, as an authorized
signatory of WESTMARK REAL ESTATE INVESTMENT SERVICES, a California general
partnership which is a General Partner of TCW Realty Fund VB, a California
general partnership, and acknowledged the foregoing to be his free act and deed
and the free act and deed of each of said general partnerships, before me,
________________________________
, Notary Public
My Commission Expires:
-71-
<PAGE>
CONSENT OF LENDERS
The undersigned hereby acknowledge notice of the Lease between Trustees of 60
State Street Trust and HPSC, Inc. dated March 8, 1994, and consent to the
Lease.
TRUST COMPANY OF THE WEST, a
California corporation, as trustee
for TCW REALTY FUND VA, as tenant
in common
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
TCW REALTY FUND VB, a California
limited partnership, as tenant in
common
By: TCW ASSET MANAGEMENT COMPANY,
a California corporation, as
General Partner
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
By: WESTMARK REAL ESTATE INVESTMENT
SERVICES, a California general
partnership, as General Partner
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
-72-
<PAGE>
CONSENT OF LENDERS
The undersigned hereby acknowledge notice of the Lease between Trustees of 60
State Street Trust and HPSC, Inc. dated March 8, 1994, and consent to the
Lease.
TEACHERS INSURANCE ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Authorized Signatory
---------------------------------
Authorized Signatory
its
hereunto duly authorized
-73-
<PAGE>
EXHIBIT 10.11
SECOND AMENDMENT TO THE HPSC, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
This Second Amendment to the HPSC, Inc. Employee Stock Ownership Plan (the
"Plan"), is adopted effective as of January 1, 1994, unless otherwise indicated,
by HPSC, Inc. (the "Company"), in accordance with Article XVI of the Plan and
the requirements of the Tax Reform Act of 1986 ("TRA '86") and Code Section
414(q)(6)(C), Code Section 401(a)(17), as appearing in the Model Amendment of
IRS Revenue Procedure 94-13, Code Section 411(a)(11), as appearing in the Model
Amendment of IRS Revenue Procedure 93-47, and Code Section 401(a)(31), as
appearing in the Model Amendment of IRS Revenue Procedure 93-12. The Company
hereby amends the Plan as follows:
1. Section 2.6 of Article II is amended by adding the following
paragraphs after paragraph one.
The family aggregation rules of Code Section 414(q)(6)(C), as modified by
Code Section 401(a)(17), and regulations thereunder shall apply to Compensation
in the following manner. In the case of an Employee who is either a 5% owner or
is both a highly compensated employee (within the meaning of Code Section
414(q)(6)) and one of the ten most highly compensated employees, the Employee,
the Employee's spouse, and any lineal descendants of such Employee who have not
attained age 19 before the close of the Year shall be treated as a single
Employee (a "family unit") with one Compensation to which the annual
compensation limit under the Plan applies. If Compensation for the family unit
exceeds the annual compensation limit under Code Section 401(a)(17), then the
Plan shall allocate the limit among the members of the family unit pro rata to
their Compensation. However, if the Plan provides for permitted disparity under
Code Section 401(1), this proration shall not be applied for purposes of
determining the portion of each individual's Compensation ("Covered
Compensation") that is below the integration level.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000 as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months over which Compensation is determined (determination period) beginning in
such calendar year.
<PAGE>
If a determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which is
the number of months in the determination period, and the denominator of which
is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
2. Section 10.5.04 of Article X is deleted in its entirety and replaced
with the following:
.04 PROCEDURES: NOTICE. As required by section l.411(a)-11(c) of the
Income Tax Regulations, not less than 30 days and not more than 90 days before
payment or commencement of a benefit, the Plan Administrator shall give notice
to a Participant or Beneficiary concerning the alternative methods by which such
benefits are to be paid.
.001 After receiving such notice, and subject to Paragraph .002 below,
a Participant or Beneficiary shall elect a form of benefit (if applicable)
and a method of distribution on a form provided by the Plan Administrator.
.002 If a distribution is one to which sections 4O1(a)(11) and 4l7 of
the Internal Revenue Code do not apply, such distribution may commence less
than 30 days after the notice required under section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that:
.0001 the Plan Administrator clearly informs the Participant or
Beneficiary that such individual has a right to a period of at least
30 days after receiving the notice to consider the decision of whether
or not to elect a distribution (and, if applicable, a particular
distribution option), and
.0002 such Participant or Beneficiary, after receiving the
notice, affirmatively elects a distribution.
2
<PAGE>
Except as specifically amended hereby, the Plan is hereby reaffirmed
in all respects.
Signed as a sealed instrument effective as of the dates stated above.
HPSC, INC.
Dated: ,1994 By: John Everets
-------------------------- -------------------------------
John Everets, Chairman
By their signatures below, the initial Trustees of the HPSC, Inc.
Employee Stock Ownership Plan hereby consent to the foregoing amendment and all
of its terms.
John Everets
---------------------------------------
John Everets, as Trustee and not
individually
Raymond Doherty
---------------------------------------
Raymond Doherty, as Trustee and not
individually
3
<PAGE>
EXHIBIT 10.12
THIRD AMENDMENT TO THE HPSC, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
This Third Amendment to the HPSC, Inc. Employee Stock Ownership Plan (the
"Plan"), is adopted effective as of January 1,1993, unless otherwise indicated,
by HPSC, Inc. (the "Company"). In accordance with Article XVI of the Plan the
Company hereby amends the Plan as follows:
1. SECTION 13.7.03.002 OF ARTICLE XIII IS DELETED AND REPLACED WITH THE
FOLLOWING:
* * * *
.002. In lieu of distribution under .001, the qualified Participant whose
Plan benefit exceeds $3,500 and who has the right to receive such a distribution
may direct the Trustee to transfer the portion of the Participant's account that
is covered by the election to another qualified plan of the Employer that
accepts such transfers; provided that such plan permits participant-directed
investment in at least three investment options and does not invest in Employer
securities to a substantial degree. Such transfer shall be made no later than
90 days after the last day of the period during which the election may be made.
2. THE FINAL SENTENCE OF SECTION 14.1 OF ARTICLE XIV IS DELETED AND
REPLACED WITH THE FOLLOWING:
14.1 * * * * The three such required investment options shall be three
mutual funds with the following investment objectives: (1) growth, through
investment substantially in equity securities; (2) income, through investment
substantially in fixed-income securities; and (3) either a balanced (growth and
income) fund or a low-risk fund, such as an insured debt or governmental debt
fund; provided that the Trustee may (at the Trustee's sole discretion) offer
additional investment alternatives from time to time under the Fund. The
Trustee shall determine the valuation of the
<PAGE>
Fund at the fair market value of the assets in the Fund and apportion any
increase or decrease in the value of the Fund at periodic intervals, not less
frequently than annually, in proportion to the account balance in the Fund on
the date of such valuation (prior to taking into account any other credits or
changes to the account made as of such date) of each Participant having an
interest in the Fund.
Except as specifically amended hereby, the Plan is hereby reaffirmed in all
respects.
Signed as a sealed instrument effective as of the date stated above.
HPSC, INC.
Dated: , 1995 By: John Everets
-------------------- ---------------------------
John Everets, Chairman
By their signatures below, the current Trustees of the HPSC, Inc. Employee
Stock Ownership Plan hereby consent to the foregoing amendment and all of its
terms.
John Everets
---------------------------------
John Everets, as Trustee and not
individually
Raymond Doherty
----------------------------------
Raymond Doherty, as Trustee and not
individually
2
<PAGE>
EXHIBIT 10.24
SECOND AMENDMENT
TO REVOLVING CREDIT AGREEMENT
This SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Second
Amendment") dated as of November 8, 1994, by and among HPSC, INC. (the
"Borrower"), a Delaware corporation, THE FIRST NATIONAL BANK OF BOSTON ("FNBB"),
a national banking association, BANK OF AMERICA ILLINOIS (formerly know as
Continental Bank N.A.) ("BoAI", and together with FNBB, the "Banks"), and THE
FIRST NATIONAL BANK OF BOSTON as Agent for the Banks and BoAI as co-agent for
the Banks. Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement (as defined below).
<PAGE>
-2-
WHEREAS, the Borrower, the Agent and the Banks are parties to that certain
Revolving Credit Agreement dated as of June 23, 1994 (as amended by that certain
First Amendment dated as of September 2, 1994 and as may be further amended,
modified or supplemented and in effect from time to time, the "Credit
Agreement");
WHEREAS, the Borrower has requested that certain terms and provisions of the
Credit Agreement be amended to enable the Borrower to enter into a Stock
Purchase Agreement dated as of November 1, 1994, by and among the Borrower, the
other parties thereto and the Chemical Bank, as agent, substantially in the form
of EXHIBIT A attached hereto and made a part hereof; and
WHEREAS, pursuant to the terms of the Stock Purchase Agreement, the
Borrower must deliver a letter of credit in favor of Chemical Bank, as agent;
WHEREAS, the Borrower has requested that a letter of credit facility be
added to the existing Credit Agreement in order to enable it to comply with its
obligations under the Stock Purchase Agreement;
<PAGE>
-3-
WHEREAS, the Agent and the Banks, subject to the terms and provisions
hereof have agreed to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
THE STOCK PURCHASE AGREEMENT.
EXHIBIT I to the Credit Agreement is replaced with EXHIBIT A attached
hereto and made a part hereof.
<PAGE>
-4-
AMENDMENT TO THE CREDIT AGREEMENT.
DEFINITIONS.
Section 1.1 of the Credit Agreement is hereby amended by inserting the
following new definitions in the appropriate place in the alphabetical sequence:
"APPLICABLE RATE. See Section 3A.6.
LETTER OF CREDIT. See Section 3A.1.
LETTER OF CREDIT APPLICATION. See Section 3A.1.1.
LETTER OF CREDIT FEE. See Section 3A.6.
LETTER OF CREDIT PARTICIPATION. See Section 3A.1.4.
<PAGE>
-5-
MAXIMUM DRAWING AMOUNT. The maximum aggregate amount from time to time
that the beneficiaries may draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse the Agent
and the Banks on account of any drawing under any Letter of Credit as provided
in Section 3A.2.
UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which
the Borrower does not reimburse the Agent and the Banks on the date specified
in, and in accordance with, Section 3A.2."
<PAGE>
-6-
CHANGES IN CERTAIN DEFINITIONS.
Section 1 of the Credit Agreement is hereby further amended by amending
certain definitions therein.
(a) The definition of "Commitment" is hereby
deleted in its entirety and replaced with the following:
"COMMITMENT. With respect to each Bank, the amount set forth on SCHEDULE 1
hereto as the amount of such Bank's commitment to make Loans to, and to
participate in the issuance, extension and renewal of Letters of Credit for the
account of, the Borrower, as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero."
(b) The definition of "Loan Documents" is hereby
deleted in its entirety and replaced with the following:
<PAGE>
-7-
"LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit and the Security Documents.
(c) The definition of "Obligations" is hereby
deleted in its entirety and replaced with the following:
"OBLIGATIONS. All Indebtedness, obligations and liabilities of any of the
Borrower and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of the other Loan Documents or in respect of any of the
Revolving Credit Loans made or Reimbursement Obligations incurred or any of the
Notes, Letter of Credit Applications, Letters of Credit or other instruments at
any time evidencing any thereof."
(d) The definition of "Stock Purchase Agreement" is
hereby deleted in its entirety and replaced with the following:
<PAGE>
-8-
"STOCK PURCHASE AGREEMENT. That certain Stock Purchase Agreement dated as
of November 1, 1994 by and among the Borrower the other parties thereto and the
Chemical Bank, as agent, which is attached hereto and made a part hereof as
EXHIBIT I."
COMMITMENT TO LEND.
Section 2.1 of the Credit Agreement is hereby amended by deleting the first
sentence thereof and replacing it with the following:
"Subject to the terms and conditions set forth in this Credit Agreement,
each of the Banks severally agrees to lend to the Borrower and the Borrower may
borrow, repay, and reborrow from time to time between the Closing Date and the
Revolving Credit Loan Maturity Date upon notice by the Borrower to the Agent
given in accordance with Section 2.6, such sums as are requested by the Borrower
up to a maximum aggregate principal amount outstanding (after giving effect to
all amounts requested) at any one time equal to such Bank's Commitment MINUS
such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount and
all Unpaid Reimbursement
<PAGE>
-9-
Obligations, PROVIDED that the sum of the outstanding amount of the Revolving
Credit Loans (after giving effect to all amounts requested) PLUS the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time
exceed the lesser of (i) the Total Commitment and (ii) the Borrowing Base."
COMMITMENT FEE.
Section 2.2 of the Credit Agreement is hereby amended by inserting, in the
seventh line thereof, the words "MINUS the sum of the Maximum Drawing Amount and
all Unpaid Reimbursement Obligations" between the words "which the Total
Commitment" and the words "exceeds the outstanding amount".
MANDATORY REPAYMENTS.
Section 3.2 of the Credit Agreement is hereby amended by deleting the first
sentence thereof in its entirety and replacing it with the following:
<PAGE>
-10-
"(e) MANDATORY REPAYMENTS. If at any time the
sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations exceeds the lesser of (i) the
Total Commitment and (ii) the Borrowing Base, for more than five (5) consecutive
Business Days, then the Borrower shall immediately pay the amount of such excess
to the Agent for the respective accounts of the Banks for application: first,
to any Unpaid Reimbursement Obligations; second, to the Revolving Credit Loans;
and third, to provide to the Agent cash collateral for Reimbursement Obligations
as contemplated by Section 3A.2(b) and (c). Each payment of any Unpaid
Reimbursement Obligations or prepayment of the Revolving Credit Loans shall be
allocated among the Banks, in proportion, as nearly as practicable, to the
Reimbursement Obligation owing to each such Bank or (as the case may be) the
respective unpaid principal amount of each Bank's Revolving Credit Note, with
adjustments to the extent practicable to equalize any prior payments or
repayments not exactly in proportion."
LETTERS OF CREDIT.
<PAGE>
-11-
The Credit Agreement shall be amended by inserting the following new
Section 3A between the end of existing Section 3.3 and the beginning of existing
Section 4:
"Section 3A. LETTERS OF CREDIT.
Section 3A.1. LETTER OF CREDIT COMMITMENTS.
3A.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and
conditions hereof and the execution and delivery by the Borrower of a letter of
credit application on the Agent's customary form (a "Letter of Credit
Application"), the Agent on behalf of the Banks and in reliance upon the
agreement of the Banks set forth in Section 3A.1.4 and upon the representations
and warranties of the Borrower contained herein, agrees, in its individual
capacity, to issue, extend and renew for the account of the Borrower one or more
standby letters of credit (individually, a "Letter of Credit"), in such form as
may be requested by the Borrower and agreed to by the Agent in order to comply
with the requirements of Section 7.2 of the Stock Purchase Agreement; PROVIDED,
HOWEVER, that, after giving effect to such request, (a) the sum of the aggregate
Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not exceed
One Million Five Hundred Thousand Dollars ($1,500,000.00) at any one time and
(b) the sum of (i) the Maximum Drawing Amount on all Letters of Credit, (ii) all
Unpaid Reimbursement Obligations, and (iii) the amount of all Loans outstanding
shall not exceed the lesser of (A) the Total Commitment and (B) the Borrowing
Base.
<PAGE>
-12
3A.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit Application
shall be completed to the satisfaction of the Agent. In the event that any
provision of any Letter of Credit Application shall be inconsistent with any
provision of this Credit Agreement, then the provisions of this Agreement shall,
to the extent of any such inconsistency, govern.
3A.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (i) provide for the
payment of sight drafts for honor thereunder when presented in accordance with
the terms thereof and when accompanied by the documents described therein and
(ii) have an expiry date no later than the date which is fourteen (14) Business
Days prior to the Revolving Credit Loan Final Maturity Date. Each Letter of
Credit so issued, extended or renewed shall be subject to the Uniform Customs.
3A.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally agrees that it
shall be absolutely liable, without regard to the occurrence of any Default or
Event of Default or any other condition precedent whatsoever, to the extent of
such Bank's Commitment Percentage, to reimburse the Agent on demand for the
amount of each draft paid by the Agent under each Letter of Credit to the extent
that such amount is not reimbursed by the Borrower pursuant to Section 3A.2
(such agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank).
<PAGE>
-13-
3A.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank shall
be treated as the purchase by such Bank of a participating interest in the
Borrower's Reimbursement Obligation under Section 3A.2 in an amount equal to
such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to Section 3A.2.
Section 3A.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrower hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Banks, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,
(a) except as otherwise expressly provided in Section 3A.2(b) and (c), on
each date that any draft presented under such Letter of Credit is honored by the
Agent, or the Agent otherwise makes a payment under or pursuant to such Letter
of Credit, (i) the amount paid by the Agent under or pursuant to such Letter of
Credit, and (ii) the amount of any customary taxes, fees, charges or other
reasonable costs and expenses whatsoever incurred by the Agent or any Bank in
connection with any payment made by the Agent or any Bank under, or pursuant to,
such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Commitment to an
amount less than the Maximum Drawing Amount, an amount equal to such difference,
which amount shall be held by the
<PAGE>
-14-
Agent for the benefit of the Banks and the Agent as cash collateral for all
Reimbursement Obligations, and
(c) upon the termination of the Total Commitment or the acceleration of
the Reimbursement Obligations with respect to all Letters of Credit in
accordance with Section 12, an amount equal to the then Maximum Drawing Amount
of all Letters of Credit, which amount shall be held by the Agent for the
benefit of the Banks and the Agent as cash collateral for all Reimbursement
Obligations.
Each such payment shall be made to the Agent at the Agent's Head
Office in immediately available funds. Interest on any and all
amounts remaining unpaid by the Borrower under this Section 3A.2 at
any time from the date such amounts become due and payable (whether as
stated in this Section 3A.2, by acceleration or otherwise) until
payment in full (whether before or after judgment) shall be payable to
the Agent on demand at the rate specified in Section 4.11 for overdue
principal of the Loans.
Section 3A.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented
or other demand for payment shall be made under any Letter of Credit, the Agent
shall notify the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. If the Borrower fails to reimburse the Agent as
provided in
<PAGE>
-15-
Section 3A.2 on or before the date that such draft is paid or other payment is
made by the Agent, the Agent may at any time thereafter notify the Banks of the
amount of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m.
(Boston time) on the Business Day next following the receipt of such notice,
each Bank shall make available to the Agent, at its Head Office, in immediately
available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (i) the average,
computed for the period referred to in clause (iii) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by the Agent
during each day included in such period, TIMES (ii) the amount equal to such
Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, TIMES
(iii) a fraction, the numerator of which is the number of days that elapse from
and including the date the Agent paid the draft presented for honor or otherwise
made payment to the date on which such Bank's Commitment Percentage of such
Unpaid Reimbursement Obligation shall become immediately available to the Agent,
and the denominator of which is 360. The responsibility of the Agent to the
Borrower and the Banks shall be only to determine that the documents (including
each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter of
Credit.
Section 3A.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Section 3A shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Agent
and the Banks that the Agent and the Banks shall not be responsible for, and the
Borrower's Reimbursement Obligations under Section 3A.2
<PAGE>
-16-
shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, fraudulent or forged, or any dispute
between or among the Borrower, the beneficiary of any Letter of Credit or any
financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of the Borrower against the
beneficiary of any Letter of Credit or any such transferee. The Agent and the
Banks shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrower agrees that
any action taken or omitted by the Agent or any Bank under or in connection with
each Letter of Credit and the related drafts and documents, if done in good
faith, shall be binding upon the Borrower and shall not result in any liability
on the part of the Agent or any Bank to the Borrower.
Section 3A.5. RELIANCE BY ISSUER. To the extent not inconsistent with
Section 3A.4, the Agent shall be entitled to rely, and shall be fully protected
in relying upon, any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action requested by the Majority
Banks unless it shall first have
<PAGE>
-17-
received such advice or concurrence of the Majority Banks as it reasonably deems
appropriate or it shall first be indemnified to its reasonable satisfaction by
the Banks against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement in accordance with a request of the Majority Banks, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Banks and all future holders of the Revolving Credit Notes or of a Letter of
Credit Participation.
Section 3A.6. LETTER OF CREDIT FEE. The Borrower shall, on the date of
issuance or any extension or renewal of any Letter of Credit and at such other
time or times as such charges are customarily made by the Agent, pay a fee (in
each case, a "Letter of Credit Fee") to the Agent in respect of each Letter of
Credit equal to the Applicable Rate (as defined below) per annum of the face
amount of such Letter of Credit, PLUS the Agent's customary issuance fee. For
the purposes of this Section 3A.6, "Applicable Rate" shall mean the percentage
rate per annum then in effect that the Borrower would pay with respect to
Eurodollar Rate Loans as the applicable margin over the Eurodollar Rate as set
forth in Section 2.5 of this Credit Agreement."
PAYMENTS TO AGENT.
<PAGE>
-18-
Section 4.3.1 of the Credit Agreement is hereby amended by inserting the
words "Reimbursement Obligations, Letter of Credit Fees," between the words
"principal, interest," and the words "commitment fees and any other amounts due
hereunder".
COMPUTATIONS.
Section 4.4 of the Credit Agreement is hereby amended by inserting the
words "and Letter of Credit Fees" between the words "commitment fees," and the
words "shall, unless otherwise expressly".
ADDITIONAL COSTS.
Section 4.7 of the Credit Agreement is hereby amended by deleting existing
subsections (a) through (e) and inserting in lieu thereof the following:
<PAGE>
-19-
"(a) subject any Bank or the Agent to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Credit Agreement, the other Loan Documents, any Letters of
Credit, such Bank's Commitment or the Loans or deposits obtained to fund Loans
or Letters of Credit (other than taxes based upon or measured by the net profit
or income of such Bank or the Agent); or
(b) materially change the basis of taxation
(except for changes in taxes on income or profits) of payments to any Bank of
the principal of or the interest on the Loans or any other amounts payable to
any Bank or the Agent under this Credit Agreement or the other Loan Documents;
or
(c) impose or increase or render applicable
(other than to the extent specifically provided for elsewhere in this Credit
Agreement) any special deposit, assessment, liquidity, capital adequacy, or
reserve or other similar requirement (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans by, or
letters of credit issued by, or commitments of an office of any Bank; or
<PAGE>
-20-
(d) impose on any Bank or the Agent any other
conditions or requirements with respect to this Credit Agreement, the other Loan
Documents, the Letters of Credit, the Loans, such Bank's Commitment, or any
class of loans, letters of credit or commitments of which any of the Loans, the
Letters of Credit, or such Bank's Commitment forms a part, and the result of any
of the foregoing is
(i) to increase the cost to any Bank of making, funding, issuing,
renewing, extending or maintaining any of the Loans or such Bank's Commitment or
any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement Obligation or
other amount payable to such Bank or the Agent hereunder on account of such
Bank's Commitment, any Letter of Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any payment or to
forego any interest or Reimbursement Obligation or other sum payable hereunder,
the amount of which payment or foregone interest or Reimbursement Obligation or
other sum is calculated by reference to the gross amount of any sum receivable
or deemed received by such Bank or the Agent from the Borrower hereunder,
<PAGE>
-21-
then, and in each such case, the Borrower will, upon written demand made by
such Bank or (as the case may be) the Agent at any time and from time to time
and as often as the occasion therefor may arise, pay to such Bank or the Agent
such additional amounts as will be sufficient to compensate the Bank or the
Agent for such additional cost, reduction, payment or foregone interest,
Reimbursement Obligation or other sum."
REGULATIONS U AND X.
Section 6.17 of the Credit Agreement is hereby amended by deleting it in
its entirety and substituting in lieu thereof the following:
"Section 6.17. REGULATIONS U AND X. The proceeds of the Loans shall be
used for working capital purposes, except to the extent permitted by Section
7.12 of this Agreement. The Borrower will obtain Letters of Credit solely for
the purpose of complying with the requirements of Section 7.2 of the Stock
Purchase Agreement. No portion of any Loan which is to be used for the purpose
of purchasing or carrying any "margin security" or "margin stock" will be
secured directly or indirectly by "margin
<PAGE>
-22-
security" or "margin stock" as such terms are used in Regulations U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224."
USE OF PROCEEDS.
Section 7.12 of the Credit Agreement is hereby amended by deleting it in
its entirety and substituting in lieu thereof the following:
"7.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
solely for working capital purposes, PROVIDED, HOWEVER, that the Borrower may
use up to a maximum aggregate amount equal to $7,000,000 MINUS the sum of the
Maximum Drawing Amount and all Unpaid Reimbursement Obligations of proceeds of
the Loans towards the purchase of 1,949,182 shares of the Borrower's Common
Stock, $0.01 par value, pursuant to the terms of the Stock Purchase Agreement,
and PROVIDED FURTHER that the Borrower may not use more than $1,000,000 of
proceeds of the Loans for the portion of the Purchase Price (as defined in the
Stock Purchase Agreement) to be paid by the Borrower on the Closing Date (as
defined in the Stock Purchase Agreement). The Borrower will obtain Letters of
<PAGE>
-23-
Credit solely for the purpose of complying with the requirements of Section
7.2 of the Stock Purchase Agreement."
NEGATIVE COVENANTS OF THE BORROWER.
The introductory text of Section 8 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower
covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation,
Letter of Credit or Note is outstanding or any Bank has any obligation to make
any Loans or the Agent has any obligations to issue, extend or renew any Letters
of Credit hereunder:"
CLOSING CONDITIONS.
<PAGE>
-24-
The introductory text of Section 10 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"Section 10. CLOSING CONDITIONS. The obligations of the Banks to make the
initial Revolving Credit Loans and of the Agent to issue any initial Letters of
Credit shall be subject to the satisfaction of the following conditions
precedent."
LEGALITY OF TRANSACTIONS.
Section 11.2 of the Credit Agreement is hereby amended by inserting at the
end thereof the following text:
<PAGE>
-25-
"or to participate in the issuance, extension or renewal of such Letter of
Credit or in the reasonable opinion of the Agent would make it illegal for the
Agent to issue, extend or renew such Letter of Credit."
CONDITIONS TO ALL BORROWINGS.
The introductory text of Section 11 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following text:
"Section 11. CONDITIONS TO ALL BORROWINGS. The obligation of the Banks to
make any Loans and of the Agent to issue, extend or renew any Letters of Credit
whether on or after the Closing Date shall be subject to the satisfaction of
each of the following conditions precedent:"
BORROWING BASE REPORT.
<PAGE>
-26-
Section 11.5 of the Credit Agreement is hereby amended by inserting before
the period at the end thereof, the words "or of the date of issuance, extension
or renewal of the requested Letter of Credit".
EVENTS OF DEFAULT AND ACCELERATION.
Section 12.1(a) of the Credit Agreement is hereby amended by inserting, in
the first line thereof, the words "or any Reimbursement Obligations" between the
words "principal of the Loans" and the words "when the same shall become due".
Section 12.1(b) of the Credit Agreement is hereby amended by inserting, in
the third line thereof, the words "any Letter of Credit Fee" between the words
"commitment fee," and the words "the Agent's fee".
<PAGE>
-27-
The final paragraph of Section 12.1 of the Credit Agreement (after Section
12(r) is hereby amended by inserting, in the fourth line, the text ", and all
Reimbursement Obligations" between the words "the other Loan Documents" and the
words "to be, and they shall thereupon".
REMEDIES.
Section 12.3 of the Credit Agreement is hereby amended by inserting, in the
fourth line, the words "or the Reimbursement Obligations" between the words
"with respect to the Loans" and the words " may proceed to protect".
Section 12.3 of the Credit Agreement is hereby further amended by
inserting, in the fourteenth line, the words "or purchaser of any Letter of
Credit Participation" between the word "Note," and the words "is intended to be
exclusive".
SETOFF; SHARING; ETC.
<PAGE>
-28-
Section 13 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:
"Section 13. SETOFF. Regardless of the adequacy of any
collateral, during the continuance of any Event of Default, any deposits or
other sums credited by or due from any of the Banks to the Borrower and any
securities or other property of the Borrower in the possession of such Bank may
be applied to or set off by such Bank against the payment of Obligations and any
and all other liabilities, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, of the Borrower to such Bank.
Each of the Banks agrees with each other Bank that (i) if an amount to be set
off is to be applied to Indebtedness of the Borrower to such Bank, other than
Indebtedness evidenced by the Notes held by such Bank or constituting
Reimbursement Obligations owed to such Bank, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness evidenced by all such
Notes held by such Bank or constituting Reimbursement Obligations owed to such
Bank, and (ii) if such Bank shall receive from the Borrower, whether by
voluntary payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes held by, or constituting
Reimbursement Obligations owed to, such Bank by proceedings against the Borrower
at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of the Note or Notes held by, or Reimbursement
Obligations owed to, such Bank any amount in excess of its ratable portion of
the payments received
<PAGE>
-29-
by all of the Banks with respect to the Notes held by, and Reimbursement
Obligations owed to, all of the Banks, such Bank will make such disposition and
arrangements with the other Banks with respect to such excess, either by way of
distribution, PRO TANTO assignment of claims, subrogation or otherwise as shall
result in each Bank receiving in respect of the Notes held by it or
Reimbursement Obligations owed it, its proportionate payment as contemplated by
this Credit Agreement; PROVIDED that if all or any part of such excess payment
is thereafter recovered from such Bank, such disposition and arrangements shall
be rescinded and the amount restored to the extent of such recovery, but without
interest."
DELINQUENT BANKS.
Section 14.5.3 of the Credit agreement is hereby deleted in its entirety
and replaced with the following:
"Notwithstanding anything to the contrary contained in this Credit
Agreement or any of the other Loan Documents, any Bank that fails (i) to make
available to the Agent its PRO RATA share of any Loan or to purchase any Letter
of Credit Participation or (ii) to comply with the provisions of Section 13 with
respect to making dispositions and arrangements with the other Banks, where such
Bank's share of
<PAGE>
-30-
any payment received, whether by setoff or otherwise, is in excess of its PRO
RATA share of such payments due and payable to all of the Banks, in each case
as, when and to the full extent required by the provisions of this Credit
Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed
a Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments due to it
from the Borrower, whether on account of outstanding Loans, Unpaid Reimbursement
Obligations, interest, fees or otherwise, to the remaining nondelinquent Banks
for application to, and reduction of, their respective PRO RATA shares of all
outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Bank
hereby authorizes the Agent to distribute such payments to the nondelinquent
Banks in proportion to their respective PRO RATA shares of all outstanding Loans
and Unpaid Reimbursement Obligations. A Delinquent Bank shall be deemed to have
satisfied in full a delinquency when and if, as a result of application of the
assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations
of the nondelinquent Banks, the Banks' respective PRO RATA shares of all
outstanding Loans and Unpaid Reimbursement Obligations have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency."
HOLDERS OF NOTES.
<PAGE>
-31-
Section 14.6 of the Credit Agreement is hereby amended by inserting, in
the second line, the words "or the purchaser of any Letter of Credit
Participation" between the words "of any Note" and the words "as the absolute
owner or purchaser".
CONDITIONS TO ASSIGNMENTS.
Section 18.1 of the Credit Agreement is
hereby amended by deleting the close parenthesis after the word "it" at the
end of the forth line and inserting, in the fifth line, the words "and its
participating interest in the risk relating to any Letters of Credit)" between
the words "the Note or Notes held by it" and the phrase "; PROVIDED that".
CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
<PAGE>
-32-
Section 18.2 of the Credit Agreement is hereby amended by deleting from the
end of clause (g) thereof the word "and". Section 18.2 of the Credit Agreement
is hereby further amended by inserting, immediately before the period after
clause (h) thereof, the words "; and (i) such assignee acknowledges that it has
made arrangements with the assigning Bank satisfactory to such assignee with
respect to its PRO RATA share of Letter of Credit Fees in respect of outstanding
Letters of Credit".
REGISTER.
Section 18.3 of the Credit Agreement is hereby amended by inserting, in the
fifth line thereof, the words "and Letter of Credit Participations purchased by"
between the words "Revolving Credit Loans owing to" and the words ", the Banks
from time to time".
PARTICIPATIONS.
<PAGE>
-33-
Section 18.5 of the Credit Agreement is hereby amended by inserting, in the
second to last line, the words "Letter of Credit Fees" after the words
"commitment fees or" and the words "to which such participant".
ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER.
Section 18.7 of the Credit Agreement is hereby amended by inserting, in the
ninth line thereof, the words "or Reimbursement Obligations" between the words
"interest in any of the Loans" and the period.
Section 18.7 is hereby further amended by inserting, in the tenth line
thereof, the words "or Reimbursement Obligations" between the words
"participating interest in any of the Loans" and the words "to a participant,".
NOTICES.
<PAGE>
-34-
Section 19 of the Credit Agreement is hereby amended by inserting, in the
third line thereof the words "or any Letter of Credit Applications" between the
words "or the Notes" and the words "shall be in writing".
CONSENTS, AMENDMENTS, WAIVERS, ETC.
Section 25 of the Credit Agreement is hereby amended by inserting, in the
thirteenth line thereof, the words "or Letter of Credit Fees" between the words
"amount of Commitment Fee" and the words "hereunder may not". Section 25 is
hereby further amended by inserting, in the seventeenth line thereof, the words
"Letter of Credit Fees," between the words "Agent's Fee" and the words "and
Section 14 may not".
AMENDMENT TO EXHIBIT E, FORM OF ASSIGNMENT AND ACCEPTANCE.
<PAGE>
-35-
Exhibit E to the Credit Agreement is hereby amended by inserting, in the
third line of Paragraph 2 thereof, the words "and its participating interest in
the risk relating to any outstanding Letters of Credit" between the words
"hereof, its Commitment Percentage is" and the text "_____.00%". Exhibit E is
hereby further amended by inserting, in the fourth line of Paragraph 2 thereof,
the words "its participating interest in Unpaid Reimbursement Obligations and"
between the text "_____.00%" and the text ", the aggregate outstanding".
Exhibit E is hereby further amended by deleting, from the beginning of clause
(vi) of Paragraph 3 thereof, the word "and". Exhibit E is hereby further
amended by inserting, immediately before the period after clause (vi) thereof,
the words "; and (vii) acknowledges that it has made arrangements with the
Assignor satisfactory to it with respect to its PRO RATA share of Letter of
Credit Fees in respect of outstanding Letters of Credit".
CONDITIONS TO EFFECTIVENESS.
This Second Amendment shall not become effective unless and until (a) the
Bank receives counterparts of this Second Amendment executed by each of the
Borrower, the Banks, the Agent and the Guarantor and (b) all proceedings in
connection with the transactions contemplated by this Amendment and all
documents incident hereto shall be satisfactory in form and substance to the
Agent, and the Agent shall have received all information and counterpart
originals or certified or other copies of such documents as the Agent may
reasonably request.
<PAGE>
-36-
REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The Borrower represents and warrants to the Agent and the Banks that (a)
each and every one of the representations and warranties made by the Borrower to
the Agent and the Banks in Section 6 or elsewhere in the Credit Agreement or in
the other Loan Documents, as amended by this Second Amendment are true and
correct in all material respects on and as of the date hereof except to the
extent that any of such representations and warranties relate, by the express
terms thereof, solely to a date prior hereto; (b) the Borrower has duly and
properly performed, complied with and observed each of its covenants, agreements
and obligations contained in Sections 7 and 8 or elsewhere in the Credit
Agreement or the other Loan Documents, as amended by this Second Amendment; and
(c) no event has occurred or is continuing and no condition exists which
constitutes a Default or Event of Default.
RATIFICATION, ETC.
Except as expressly amended hereby, the Credit Agreement and the Loan
Documents and all documents, instruments and agreements related thereto,
including, but not limited to the Security
<PAGE>
-37-
Documents, are hereby ratified and confirmed in all respects and shall continue
in full force and effect. The Credit Agreement and this Second Amendment shall
be read and construed as a single agreement. All references in the Credit
Agreement or any related agreement or instrument to the Credit Agreement shall
hereafter refer to the Credit Agreement as amended hereby.
EXPENSES AND FEES.
The Borrower hereby agrees to pay to the Agent, on demand by the Agent, all
reasonable out-of-pocket costs and expenses incurred or sustained by the Agent
or any of the Banks in connection with the preparation of this Second Amendment
and the documents referred to herein (including reasonable legal fees).
NO WAIVER.
<PAGE>
-38-
Nothing contained herein shall constitute a waiver of, impair or otherwise
affect any Obligations, any other obligation of the Borrower or any rights of
the Agent or either of the Banks consequent thereon.
COUNTERPARTS.
This Second Amendment may be executed in one or more counterparts, each of
which shall be deemed an original but which together shall constitute one and
the same instrument.
HEADINGS.
Section headings in this Second Amendment are included herein for
convenience of reference only and shall not constitute part of this First
Amendment for any other purpose.
<PAGE>
-39-
GOVERNING LAW.
THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO
CONFLICT OF LAWS).
<PAGE>
-40-
IN WITNESS WHEREOF, the undersigned have duly executed this Second
Amendment as a sealed instrument as of the date first set forth above.
HPSC, INC.
By: /s/ John Everets, Jr
--------------------------
John Everets, Jr
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: /s/ Mitchell B. Feldman
--------------------------
Mitchell B. Feldman
BANK OF AMERICA ILLINOIS,
individually and as co-agent
<PAGE>
-41-
By: /s/ Mark N. Hurley
--------------------------
Mark N. Hurley
CONSENTED TO BY THE UNDERSIGNED GUARANTOR:
AMERICAN COMMERCIAL
FINANCE CORPORATION
By: /s/ John Everets, Jr
--------------------------
John Everets, Jr
<PAGE>
EXHIBIT 10.25
THIRD AMENDMENT
TO REVOLVING CREDIT AGREEMENT
This THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Third Amendment")
dated as of November 22, 1994, by and among HPSC, INC. (the "Borrower"), a
Delaware corporation, THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), a national
banking association, BANK OF AMERICA ILLINOIS (formerly know as Continental Bank
N.A.) ("BoAI", and together with FNBB, the "Banks"), and THE FIRST NATIONAL BANK
OF BOSTON as Agent for the Banks and BoAI as co-agent for the Banks.
Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement (as defined below).
WHEREAS, the Borrower, the Agent and the Banks are parties to that certain
Revolving Credit Agreement dated as of June 23, 1994 (as amended by the First
Amendment dated September 2, 1994, the Second Amendment dated November 8, 1994
and as may be further amended, modified or supplemented and in effect from time
to time, the "Credit Agreement");
WHEREAS, the Borrower has requested that certain terms and provisions of
the Credit Amendment be amended and the Agent and the Banks, subject to the
terms and provisions hereof have agreed to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
AMENDMENT TO THE CREDIT AMENDMENT.
USE OF PROCEEDS.
Section 7.12 of the Credit Agreement is hereby amended by deleting the
number "$1,000,000" and inserting in lieu thereof the number "$2,000,000".
RESTRICTIONS ON LIENS.
Section 8.2 of the Credit Agreement is hereby amended by inserting the
following new subsection (k) imediately following existing subsection (j):
"(k) liens in favor of the Chemical Bank, as agent, on the
Remainder Shares (as defined in the Stock Purchase Agreement) to secure the Note
(as defined in the Stock Purchase Agreement) pursuant to Section 7.1 of the
Stock Purchase Agreement."
<PAGE>
CONDITIONS TO EFFECTIVENESS.
This Third Amendment shall not become effective unless and until (a) the
Bank receives counterparts of this Third Amendment executed by each of the
Borrower, the Banks, the Agent and the Guarantor and (b) all proceedings in
connection with the transactions contemplated by this Amendment and all
documents incident hereto shall be satisfactory in form and substance to the
Agent, and the Agent shall have received all information and counterpart
originals or certified or other copies of such documents as the Agent may
reasonably request.
REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The Borrower represents and warrants to the Agent and the Banks that
(a) each and every one of the representations and warranties made by the
Borrower to the Agent and the Banks in Section 6 or elsewhere in the Credit
Agreement or in the other Loan Documents, as amended by this Third Amendment are
true and correct in all material respects on and as of the date hereof except to
the extent that any of such representations and warranties relate, by the
express terms thereof, solely to a date prior hereto; (b) the Borrower has duly
and properly performed, complied with and observed each of its covenants,
agreements and obligations contained in Sections 7 and 8 or elsewhere in the
Credit Agreement or the other Loan Documents, as amended by this Third
Amendment; and (c) no event has occurred or is continuing and no condition
exists which constitutes a Default or Event of Default.
RATIFICATION, ETC.
<PAGE>
Except as expressly amended hereby, the Credit Agreement and the Loan
Documents and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Third Amendment shall be read and construed as a
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.
MISCELLANEOUS.
The Borrower hereby agrees to pay to the Agent, on demand by the Agent, all
reasonable out-of-pocket costs and expenses incurred or sustained by the Agent
or any of the Banks in connection with the preparation of this Third Amendment
and the documents referred to herein (including reasonable legal fees). Nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligation of the Borrower or any rights of the Agent or
either of the Banks consequent thereon. This Third Amendment may be executed in
one or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument. Section headings in this
Third Amendment are included herein for convenience of reference only and shall
not constitute part of this First Amendment for any other purpose.
GOVERNING LAW.
<PAGE>
THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO
CONFLICT OF LAWS).
IN WITNESS WHEREOF, the undersigned have duly executed this Third Amendment
as a sealed instrument as of the date first set forth above.
HPSC, INC.
By: /s/ John Everets, Jr.
-------------------------------------
John Everets, Jr.
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: /s/ Mitchell B. Feldman
-------------------------------------
Mitchell B. Feldman
BANK OF AMERICA ILLINOIS,
individually and as co-agent
<PAGE>
By: /s/ Sharon Ephraim
-------------------------------------
Sharon Ephraim
CONSENTED TO BY THE UNDERSIGNED GUARANTOR:
AMERICAN COMMERCIAL
FINANCE CORPORATION
By: /s/ John Everets, Jr.
-------------------------
John Everets, Jr.
<PAGE>
EXHIBIT 10.26
FOURTH AMENDMENT
TO REVOLVING CREDIT AGREEMENT
This FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Fourth
Amendment") dated as of December 22, 1994, by and among HPSC, INC. (the
"Borrower"), a Delaware corporation, THE FIRST NATIONAL BANK OF BOSTON ("FNBB"),
a national banking association, BANK OF AMERICA ILLINOIS (formerly know as
Continental Bank N.A.) ("BoAI", and together with FNBB, the "Banks"), and THE
FIRST NATIONAL BANK OF BOSTON as Agent for the Banks and BoAI as co-agent for
the Banks. Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement (as defined below).
WHEREAS, the Borrower, the Agent and the Banks are parties to that certain
Revolving Credit Agreement dated as of June 23, 1994 (as amended by the First
Amendment dated September 2, 1994, the Second Amendment dated November 8, 1994,
the Third Amendment dated November 22, 1994, and as may be further amended,
modified or supplemented and in effect from time to time, the "Credit
Agreement");
<PAGE>
WHEREAS, the Borrower has requested that certain terms and provisions of
the Credit Amendment be amended and the Agent and the Banks, subject to the
terms and provisions hereof have agreed to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AMENDMENT TO THE CREDIT AMENDMENT. Section 3A.1.1. ("COMMITMENT TO ISSUE
LETTERS OF CREDIT") is hereby amended by deleting the text "One Million Five
Hundred Thousand Dollars ($1,500,000.00)" where it appears and inserting in lieu
thereof the text "Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000.00)".
CONDITIONS TO EFFECTIVENESS.
This Fourth Amendment shall not become effective unless and until (a) the
Bank receives counterparts of this Fourth Amendment executed by each of the
Borrower, the Banks, the Agent and the Guarantor and (b) all proceedings in
connection with the transactions contemplated by this Amendment and all
documents incident hereto shall be satisfactory in form and substance to the
Agent, and the Agent shall have received all information and counterpart
originals or certified or other copies of such documents as the Agent may
reasonably request.
<PAGE>
REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The Borrower represents and warrants to the Agent and the Banks that
(a) each and every one of the representations and warranties made by the
Borrower to the Agent and the Banks in Section 6 or elsewhere in the Credit
Agreement or in the other Loan Documents, as amended by this Fourth Amendment
are true and correct in all material respects on and as of the date hereof
except to the extent that any of such representations and warranties relate, by
the express terms thereof, solely to a date prior hereto; (b) the Borrower has
duly and properly performed, complied with and observed each of its covenants,
agreements and obligations contained in Sections 7 and 8 or elsewhere in the
Credit Agreement or the other Loan Documents, as amended by this Fourth
Amendment; and (c) no event has occurred or is continuing and no condition
exists which constitutes a Default or Event of Default.
RATIFICATION, ETC.
Except as expressly amended hereby, the Credit Agreement and the Loan
Documents and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Fourth
<PAGE>
Amendment shall be read and construed as a single agreement. All references in
the Credit Agreement or any related agreement or instrument to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended hereby.
MISCELLANEOUS.
The Borrower hereby agrees to pay to the Agent, on demand by the Agent, all
reasonable out-of-pocket costs and expenses incurred or sustained by the Agent
or any of the Banks in connection with the preparation of this Fourth Amendment
and the documents referred to herein (including reasonable legal fees). Nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligation of the Borrower or any rights of the Agent or
either of the Banks consequent thereon. This Fourth Amendment may be executed
in one or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument. Section headings in this
Fourth Amendment are included herein for convenience of reference only and shall
not constitute part of this First Amendment for any other purpose. This fourth
amendment shall be governed by, and construed in accordance with, the laws of
the commonwealth of massachusetts (without reference to conflict of laws).
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Fourth
Amendment as a sealed instrument as of the date first set forth above.
HPSC, INC.
By: /s/ John Everets, Jr
--------------------------------
John Everets, Jr
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: /s/ Mitchell B. Feldman
--------------------------------
Mitchell B. Feldman
BANK OF AMERICA ILLINOIS,
individually and as co-agent
By: /s/ Craig Monroe
--------------------------------
Craig Monroe
<PAGE>
CONSENTED TO BY THE UNDERSIGNED GUARANTOR:
AMERICAN COMMERCIAL
FINANCE CORPORATION
By: /s/ John Everets, Jr
---------------------------
John Everets, Jr
<PAGE>
EXHIBIT 10.27
FIFTH AMENDMENT
TO REVOLVING CREDIT AGREEMENT
This FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Fifth Amendment")
dated as of January 6, 1995, by and among HPSC, INC. (the "Borrower"), a
Delaware corporation, THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), a national
banking association, BANK OF AMERICA ILLINOIS (formerly know as Continental Bank
N.A.) ("BoAI", and together with FNBB, the "Banks"), and THE FIRST NATIONAL BANK
OF BOSTON as Agent for the Banks and BoAI as co-agent for the Banks.
Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement (as defined below).
WHEREAS, the Borrower, the Agent and the Banks are parties to that certain
Revolving Credit Agreement dated as of June 23, 1994 (as amended by the First
Amendment dated September 2, 1994, the Second Amendment dated November 8, 1994,
the Third Amendment dated November 22, 1994, the
<PAGE>
Fourth Amendment dated as of December 22, 1994 and as may be further amended,
modified or supplemented and in effect from time to time, the "Credit
Agreement");
WHEREAS, the Borrower has requested that FNBB temporarily increase its
lending commitment and FNBB, subject to the terms and provisions hereof, has
agreed to temporarily increase its lending commitment and the Agent and the
other Banks have approved such temporary increase;
WHEREAS, the Borrower has requested that certain other terms and provisions
of the Credit Amendment be amended and the Agent and the Banks, subject to the
terms and provisions hereof have agreed to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AMENDMENT TO THE CREDIT AMENDMENT.
<PAGE>
1.1. CHANGES IN CERTAIN DEFINITIONS. Section 1 of the Credit Agreement is
hereby amended by deleting the phrase "at least fifty-one (51%)" each time it
appears in the definition of "Majority Banks" and inserting in lieu thereof in
each such place, the phrase "sixty-six and two-thirds (66-2/3%)".
1.2. SUPPLEMENTAL COMMITMENT. Subject to the provisions of the Credit
Agreement, for the period (the "Supplemental Period") January 5, 1995 to the
earlier to occur of (i) February 15, 1995 or (ii) the effective date of that
certain lease receivables-backed credit facility by and among HPSC Funding
Corporation II, a Delaware corporation, Capital Markets Assurance Corporation, a
New York insurance company, as surety provider, the Borrower, FNBB and either of
Triple-A One Funding Corporation, a Delaware corporation or Triple-A One Plus
Funding Corporation, a Delaware corporation, as more fully described in EXHIBIT
B attached hereto, FNBB will make available to the Borrower a supplemental
revolving credit commitment in the amount of $5,000,000 (the "Supplemental
Commitment").
1.2.1. SUPPLEMENTAL COMMITMENT FEE. The Borrower agrees to pay to FNBB, a
supplemental commitment fee on the Supplemental Commitment at the rate and in
the manner set forth in Section 2.6 of the Credit Agreement treating the
Supplemental Loans as "Revolving Credit Loans" and the Supplemental
<PAGE>
Commitment as the "Total Commitment" for the purposes of calculating such
supplemental commitment fee.
1.2.2. FUNDING OF REVOLVING CREDIT LOANS DURING SUPPLEMENTAL PERIOD. If
during the Supplemental Period, the sum of the outstanding amount of the
Revolving Credit Loans exceeds the Total Commitment as in effect prior to
January 5, 1995, then notwithstanding the provisions of Section 2 of the Credit
Agreement, any additional Revolving Credit Loans ("Supplemental Loans") will be
funded solely by FNBB.
1.2.3. APPLICATION OF PAYMENTS. The Supplemental Loans shall be subject
to all provisions of the Credit Agreement, PROVIDED, HOWEVER, that
notwithstanding the provisions of Section 3 of the Credit Agreement, so long as
Supplemental Loans are outstanding and no Event of Default has occurred and is
continuing, any payments of principal by the Borrower to any Bank and any
collections of Accounts Receivable, shall be applied, first, to Supplemental
Loans then outstanding, and, second, to the Banks in accordance with the
provisions of Section 3.3 of the Credit Agreement. If an Event of Default has
occurred and is continuing, any such payments or collections shall be applied in
accordance with the provisions of Section 3.3 of the Credit Agreement treating
all Supplemental Loans as Revolving Credit Loans.
<PAGE>
1.2.4 TERMINATION OF SUPPLEMENTAL COMMITMENT. On April 30, 1995, the
Supplemental Commitment shall terminate and, notwithstanding the provisions of
Section 3.2 of the Credit Agreement, the Borrower shall pay to the Agent for the
account of FNBB, the sum of the outstanding amount of the Supplemental Loans for
application to the Supplemental Loans.
1.3. COMMITMENT, COMMITMENT PERCENTAGES. SCHEDULE 1 attached hereto shall
be substituted for SCHEDULE 1 attached to the Credit Agreement.
1.4. RESTRICTIONS ON INVESTMENTS. Section 8 of the Credit Agreement is
hereby amended by deleting subsection (e) thereof in its entirety and inserting
in lieu thereof the following new subsection (e):
"(e) Investments with respect to Indebtedness permitted
by Section 8.1(j) so long as (i) such entities remain Subsidiaries of the
Borrower and (ii) the aggregate amount of Investments made by the Borrower and
its subsidiaries in ACFC does not exceed $3,000,000 at any time during the
Supplemental Period."
<PAGE>
CONDITIONS TO EFFECTIVENESS.
This Fifth Amendment shall not become effective unless and until:
(a) the Agent receives counterparts of this Fifth Amendment
executed by each of the Borrower, the Banks, the Agent and the Guarantor;
(b) the Agent receives an Amended and Restated Revolving
Credit Note payable to the order of FNBB signed by the Borrower substantially in
the form of EXHIBIT A attached hereto (the "Amended and Restated Note"); and
(c) all proceedings in connection with the transactions
contemplated by this Fifth Amendment and the Amended and Restated Note (as
defined below) and all documents incident hereto shall be satisfactory in form
and substance to the Agent, and the Agent shall have received all information
and counterpart originals or certified or other copies of such documents as the
Agent may reasonably request, including, without limitation, copies, certified
by the Secretary or
<PAGE>
Assistant Secretary of the Borrower as of the date hereof, of the resolutions of
the Borrower approving this Fifth Amendment and the other documents and
instruments required to be delivered hereunder by the Borrower; and copies,
certified by the Secretary or Assistant Secretary of the Guarantor as of the
date hereof, of the resolutions of the Guarantor approving this Fifth Amendment,
in a form satisfactory to the Agent;
(d) the Borrower shall have paid to the Agent an amendment
fee in the amount of $6,250 for the account of FNBB.
REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The Borrower represents and warrants to the Agent and the Banks that
(a) each and every one of the representations and warranties made by the
Borrower to the Agent and the Banks in Section 6 or elsewhere in the Credit
Agreement or in the other Loan Documents, as amended by this Fifth Amendment and
the Amended and Restated Note, are true and correct in all material respects on
and as of the date hereof except to the extent that any of such representations
and warranties relate, by the express terms thereof, solely to a date prior
hereto; (b) the Borrower has duly and properly performed, complied with and
<PAGE>
observed each of its covenants, agreements and obligations contained in Sections
7 and 8 or elsewhere in the Credit Agreement or the other Loan Documents, as
amended by this Fifth Amendment and the Amended and Restated Note; and (c) no
event has occurred or is continuing and no condition exists which constitutes a
Default or Event of Default.
RATIFICATION, ETC.
Except as expressly amended by this Amendment and the Amended and Restated
Note, the Credit Agreement and the Loan Documents and all documents, instrum
ents and agreements related thereto, including, but not limited to the
Security Documents, are hereby ratified and confirmed in all respects and shall
continue in full force and effect. The Borrower confirms and agrees that the
Obligations of the Borrower to the Banks under the Loan Documents, as amended
and supplemented hereby, are secured by, guarantied under, and entitled to the
benefits, of the Security Documents. The Borrower, the Guarantor, the Agent and
the Banks hereby acknowledge and agree that all references to the Credit
Agreement and the Obligations thereunder contained in any of the Loan
<PAGE>
Documents shall be references to the Credit Agreement and the Obligations, as
affected and increased hereby and as the same may be amended, modified,
supplemented, or restated from time to time. The Security Documents and the
perfected first priority security interests of the Banks thereunder shall
continue in full force and effect, and the collateral security and guaranties
provided for in the Security Documents shall not be impaired by this Amendment
or the Amended and Restated Note. The Credit Agreement and this Fifth Amendment
shall be read and construed as a single agreement.
MISCELLANEOUS.
The Borrower hereby agrees to pay to the Agent, on demand by the Agent, all
reasonable out-of-pocket costs and expenses incurred or sustained by the Agent
or any of the Banks in connection with the preparation of this Fifth Amendment
and the documents referred to herein (including reasonable legal fees). Nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligation of the Borrower or any rights of the Agent or
either of the Banks consequent thereon. This Fifth Amendment may be executed in
one or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument. Section headings in this
Fifth Amendment are included herein for convenience of reference only and shall
not constitute part of this Fifth Amendment for any other purpose. This Fifth
Amendment shall be governed by, and construed in accordance with, the laws of
the Commonwealth of Massachusetts (without reference to conflict of laws).
<PAGE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
-11-
IN WITNESS WHEREOF, the undersigned have duly executed this Fifth Amendment
as a sealed instrument as of the date first set forth above.
HPSC, INC.
By: /s/ John Everets, Jr.
-----------------------------------------
John Everets, Jr.
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: /s/ Mitchell B. Feldman
-----------------------------------------
Mitchell B. Feldman
BANK OF AMERICA ILLINOIS,
individually and as co-agent
By: /s/ Craig Monroe
-----------------------------------------
Craig Monroe
<PAGE>
-12-
CONSENTED TO BY THE UNDERSIGNED GUARANTOR:
AMERICAN COMMERCIAL
FINANCE CORPORATION
By: /s/ John Everets, Jr
---------------------------
John Everets, Jr
<PAGE>
EXHIBIT 10.28
SIXTH AMENDMENT
TO REVOLVING CREDIT AGREEMENT
This SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Sixth Amendment")
dated as of February 3, 1995, by and among HPSC, INC. (the "Borrower"), a
Delaware corporation, THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), a national
banking association, BANK OF AMERICA ILLINOIS (formerly known as Continental
Bank N.A.) ("BoAI", and together with FNBB, the "Banks"), and THE FIRST NATIONAL
BANK OF BOSTON as Agent for the Banks and BoAI as co-agent for the Banks.
Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement (as defined below).
WHEREAS, the Borrower, the Agent and the Banks are parties to that certain
Revolving Credit Agreement dated as of June 23, 1994 (as amended by the First
Amendment dated September 2, 1994, the Second Amendment dated November 8, 1994,
the Third Amendment dated November 22, 1994, the Fourth Amendment dated as of
December 22, 1994, the Fifth Amendment dated January 6, 1995
<PAGE>
and as may be further amended, modified or supplemented and in effect from time
to time, the "Credit Agreement");
WHEREAS, the Borrower intends to sell and otherwise transfer certain assets to
HPSC Bravo Funding Corp., a Delaware corporation ("Funding II") and wholly-owned
subsidiary of the Borrower pursuant to that certain Purchase and Contribution
Agreement dated as of February 6, 1995 by and between Funding II and the
Borrower;
WHEREAS, Funding II will purchase and otherwise acquire such transferred assets
with proceeds from that certain lease receivables-backed credit facility dated
as of February 6, 1995 by and among Funding II, Triple-A One Funding
Corporation, a Delaware corporation ("Triple-A") and Capital Markets Assurance
Corporation, a New York stock insurance company pursuant to which Triple-A will
make certain loans to Funding II;
WHEREAS, the Borrower has requested that certain terms and provisions of the
Credit Amendment be amended to permit the above described transactions and the
Agent and the Banks, subject to the terms and provisions hereof have agreed to
amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AMENDMENT TO THE CREDIT AMENDMENT.
1.1. CHANGES IN CERTAIN DEFINITIONS. Section 1 of the Credit Agreement is
hereby amended by:
<PAGE>
(a) deleting the existing definition of "Funding" and
inserting in lieu thereof the following new definition:
"FUNDING. Each of HPSC Funding Corp. I and HPSC Bravo Funding
Corp."
(b) inserting the following new definitions in the
appropriate place in the alphabetical sequence of definitions:
"EVENT OF TERMINATION. Any event or condition identified as an
"Event of Termination" in Section 7.01 of the Purchase
Agreement."
"FUNDING I. HPSC Funding Corp. I., a Delaware corporation and wholly-owned
subsidiary of the Borrower."
"FUNDING II. HPSC Bravo Funding Corp., a Delaware corporation and wholly-owned
subsidiary of the Borrower.";
"FUNDING II CREDIT AGREEMENT. The lease receivables-backed credit agreement
dated as of February 6, 1995 by and among the Funding II, Triple-A One Funding
Corporation, a Delaware corporation and Capital Markets Assurance Corporation, a
New York stock insurance company."
<PAGE>
"FUNDING II FACILITY DOCUMENTS. Collectively, the Purchase Agreement, the
Funding II Credit Agreement and all other agreements, documents and instruments
entered into pursuant thereto or in connection therewith."
"PURCHASE AGREEMENT. The Purchase and Contribution Agreement dated as of
February 6, 1995 by and between Funding II and the Borrower."
"TRANSFERRED ASSETS. The accounts, chattel paper, instruments, and other assets
related thereto, comprised in the Collateral which are sold or otherwise
transferred to Funding II pursuant to the Purchase Agreement."
"WIND-DOWN EVENT. Any event or condition identified as a "Wind-Down Event" in
Section 7.01 of the Funding II Credit Agreement."
(c) amending the definition of "Eligible Accounts
Receivable" by inserting the following new subsections after existing subsection
(xv): "(xvi) that have not been transferred to Funding II pursuant to the
Purchase Agreement; and (xvii) that are not subject to any lien or negative
pledge pursuant to the Funding II Credit Agreement;"
1.2. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. Section 7.4(h)
of the Credit Agreement is hereby amended by inserting the text "or the Funding
II Credit Agreement" between the text "from time to time copies of all reports
delivered under the Funding Indenture" and the text "and such other financial
data and information".
<PAGE>
1.3. RESTRICTIONS ON INDEBTEDNESS. Section 8.1 of the Credit Agreement is
hereby amended by inserting the following new subsection at the end thereof:
"(l) Indebtedness incurred by Funding II pursuant to the Funding II Credit
Agreement."
1.4. RESTRICTIONS ON LIENS. Section 8.2 of the Credit Agreement is hereby
amended by inserting the following new subsection at the end thereof:
"(l) liens granted by Funding II in connection with the Funding II Credit
Agreement."
<PAGE>
1.5. DISPOSITION OF ASSETS. Section 8.5.2 of the Credit Agreement is
hereby amended by inserting the following at the end thereof:
"Notwithstanding the foregoing provisions of this Section 8.5.2
and provided no Event of Default has occurred and is continuing,
the Borrower and its Subsidiaries may dispose of assets pursuant
to the Purchase Agreement."
1.6. OTHER DEBT. Section 8.8 of the Credit Agreement is hereby amended by
inserting the following text at the end thereof "or the Funding II Credit
Agreement."
1.7. EVENTS OF DEFAULT AND ACCELERATION.
(A) SECTION 12.1(J) OF THE CREDIT AGREEMENT IS HEREBY
AMENDED BY INSERTING THE TEXT "OR INDEBTEDNESS UNDER THE FUNDING II CREDIT
AGREEMENT" BETWEEN THE TEXT "INDEBTEDNESS UNDER THE FUNDING INDENTURE" AND THE
TEXT "SHALL ACCELERATE THE MATURITY".
(b) Section 12.1(j) of the Credit Agreement is hereby
further amended by adding to the end thereof the following text:
<PAGE>
"AND PROVIDED FURTHER that (A) the early
termination of the Funding II Credit Agreement by Funding II pursuant to the
terms thereof shall not constitute an acceleration by such holders and (B)
payments by Funding II pursuant to Sections 2.05(b) and 2.05(c) of the Purchase
Agreement shall not constitute prepayment of Indebtedness under the Funding II
Credit Agreement."
(C) SECTION 12.1 OF THE CREDIT AGREEMENT IS HEREBY FURTHER
AMENDED BY INSERTING THE FOLLOWING NEW SUBSECTION (S) IMMEDIATELY AFTER EXISTING
SUBSECTION (R) THEREOF:
"(s) the occurrence of a Event of Termination and
the expiration of any applicable cure period available to Funding II under the
Purchase Agreement or a Wind-Down Event and the expiration of any applicable
cure period available to Funding II under the Funding II Credit Agreement."
1.8. AGENT'S AUTHORIZATION. Section 14.1 of the Credit Agreement is hereby
amended by adding the following new sentence at the end thereof:
<PAGE>
"EACH OF THE BANKS AND THE AGENT ACKNOWLEDGE AND AGREE THAT (I)
THE AGENT IS AUTHORIZED TO RELEASE THE SECURITY INTEREST CREATED
By the Security Documents in the Transferred Assets and that (ii)
the Agent is authorized to execute and deliver, on behalf of the
Banks and the Agent, such partial releases under the Uniform
Commercial Code as may be necessary or desirable to accomplish a
release of the security interest created by the Security
Documents in the Transferred Assets."
AMENDMENT TO THE SECURITY AGREEMENTS. Section 6 of each of the Security
Agreements is hereby amended by deleting the word "The" appearing at the
beginning thereof and inserting in lieu thereof the following text:
"Except for transfers permitted by Section 8.5.2 of the Credit
Agreement, the"
CONDITIONS TO EFFECTIVENESS.
<PAGE>
This Sixth Amendment shall not become effective unless and until:
(a) the Agent receives counterparts of this Sixth Amendment
executed by each of the Borrower, the Banks, the Agent and the Guarantor;
(b) the Agent receives a copy, certified by the Secretary
or Assistant Secretary of the Borrower, of such Funding II Facility Documents as
the Agent may reasonable request, including, without limitation, the Purchase
Agreement and the Funding II Credit Agreement; and
(b) all proceedings in connection with the transactions
contemplated by this Sixth Amendment and all documents incident hereto shall be
satisfactory in form and substance to the Agent, and the Agent shall have
received all information and counterpart originals or certified or other copies
of such documents as the Agent may reasonably request, including, without
limitation, copies, certified by the Secretary or Assistant Secretary of the
Borrower as of the date hereof, of the resolutions of the Borrower approving
this Sixth Amendment and the other documents and instruments required to be
delivered hereunder by the Borrower; and copies, certified by the
<PAGE>
Secretary or Assistant Secretary of the Guarantor as of the date hereof, of the
resolutions of the Guarantor approving this Sixth Amendment, in a form
satisfactory to the Agent.
REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The Borrower represents and warrants to the Agent and the Banks that
(a) each and every one of the representations and warranties made by the
Borrower to the Agent and the Banks in Section 6 or elsewhere in the Credit
Agreement or in the other Loan Documents, as amended by this Sixth Amendment,
are true and correct in all material respects on and as of the date hereof
except to the extent that any of such representations and warranties relate, by
the express terms thereof, solely to a date prior hereto; (b) the Borrower has
duly and properly performed, complied with and observed each of its covenants,
agreements and obligations contained in Sections 7 and 8 or elsewhere in the
Credit Agreement or the other Loan Documents, as amended by this Sixth
Amendment; and (c) no event has occurred or is continuing and no condition
exists which constitutes a Default or Event of Default.
RATIFICATION, ETC.
<PAGE>
Except as expressly amended by this Sixth Amendment, the Credit Agreement
and the Loan Documents and all documents, instruments and agreements related
thereto, including, but not limited to the Security Documents, are hereby
ratified and confirmed in all respects and shall continue in full force and
effect. The Borrower confirms and agrees that the Obligations of the Borrower
to the Banks under the Loan Documents, as amended and supplemented hereby, are
secured by, guarantied under, and entitled to the benefits, of the Security
Documents. The Borrower, the Guarantor, the Agent and the Banks hereby
acknowledge and agree that all references to the Credit Agreement and the
Obligations thereunder contained in any of the Loan Documents shall be
references to the Credit Agreement and the Obligations, as the same may be
amended, modified, supplemented, or restated from time to time. The Security
Documents and the perfected first priority security interests of the Banks
thereunder shall continue in full force and effect, and the collateral security
and guaranties provided for in the Security Documents shall not be impaired by
this Sixth Amendment. The Credit Agreement and this Sixth Amendment shall be
read and construed as a single agreement.
MISCELLANEOUS.
The Borrower hereby agrees to pay to the Agent, on demand by the Agent, all
reasonable out-of-pocket costs and expenses incurred or sustained by the Agent
or any of the Banks in connection with the preparation of this Sixth Amendment
and the documents referred to herein (including reasonable legal fees). Nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations,
<PAGE>
any other obligation of the Borrower or any rights of the Agent or either of the
Banks consequent thereon. This Sixth Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument. Section headings in this Sixth
Amendment are included herein for convenience of reference only and shall not
constitute part of this Sixth Amendment for any other purpose. This Sixth
Amendment shall be governed by, and construed in accordance with, the laws of
the Commonwealth of Massachusetts (without reference to conflict of laws).
<PAGE>
-13-
IN WITNESS WHEREOF, the undersigned have duly executed this Sixth Amendment as a
sealed instrument as of the date first set forth above.
HPSC, INC.
By: /s/ John Everets, Jr
-----------------------------------------
John Everets, Jr
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: /s/ Mitchell B. Feldman
-----------------------------------------
Mitchell B. Feldman
BANK OF AMERICA ILLINOIS,
individually and as co-agent
By: /s/ Mark N. Hurley
-----------------------------------------
Mark N. Hurley
CONSENTED TO BY THE UNDERSIGNED GUARANTOR:
<PAGE>
-14-
AMERICAN COMMERCIAL
FINANCE CORPORATION
By: /s/ John Everets, Jr
-------------------------------
John Everets, Jr
<PAGE>
EXHIBIT 10.29
SEVENTH AMENDMENT
TO REVOLVING CREDIT AGREEMENT
This SEVENTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Seventh
Amendment") dated as of February 6, 1995, by and among HPSC, INC. (the
"Borrower"), a Delaware corporation, THE FIRST NATIONAL BANK OF BOSTON ("FNBB"),
a national banking association, BANK OF AMERICA ILLINOIS (formerly known as
Continental Bank N.A.) ("BoAI", and together with FNBB, the "Banks"), and THE
FIRST NATIONAL BANK OF BOSTON as Agent for the Banks and BoAI as co-agent for
the Banks. Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement (as defined below).
WHEREAS, the Borrower, the Agent and the Banks are parties to that certain
Revolving Credit Agreement dated as of June 23, 1994 (as amended by the First
Amendment dated September 2, 1994, the Second Amendment dated November 8, 1994,
the Third Amendment dated November 22, 1994, the Fourth Amendment dated as of
December 22, 1994, the Fifth Amendment dated as of January 6, 1995, the Sixth
Amendment dated as of February 3, 1995 and as may be further amended, modified
or supplemented and in effect from time to time, the "Credit Agreement");
<PAGE>
WHEREAS, the Borrower requested that FNBB temporarily increase its lending
commitment and FNBB, subject to the terms and provisions of the Fifth Amendment,
agreed to temporarily increase its lending commitment and the Agent and the
other Banks approved such temporary increase;
WHEREAS, the Borrower has requested that the Supplemental Period (as
defined in the Fifth Amendment) be extended and the Agent and the Banks, subject
to the terms and provisions hereof have agreed to extend the Supplemental Period
(as defined in the Fifth Amendment);
NOW, THEREFORE, in consideration of the premises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
EXTENSION OF SUPPLEMENTAL PERIOD.
Subject to the provisions of the credit agreement and the fifth amendment,
for the period (the "Supplemental Period") January 5, 1995 to April 30, 1995,
FNBB will make available to the Borrower a supplemental revolving credit
commitment in the amount of the Supplemental Commitment (as defined in the Fifth
Amendment).
CONDITIONS TO EFFECTIVENESS.
<PAGE>
This Seventh Amendment shall not become effective unless and until:
(a) the Agent receives counterparts of this Seventh Amendment
executed by each of the Borrower, the Banks, the Agent and the Guarantor; and
(b) all proceedings in connection with the transactions
contemplated by this Seventh Amendment, including, without limitation, copies,
certified by the Secretary or Assistant Secretary of the Borrower as of the date
hereof, of the resolutions of the Borrower approving this Seventh Amendment; and
copies, certified by the Secretary or Assistant Secretary of the Guarantor as of
the date hereof, of the resolutions of the Guarantor approving this Seventh
Amendment, in a form satisfactory to the Agent and all documents incident hereto
shall be satisfactory in form and substance to the Agent, and the Agent shall
have received all information and counterpart originals or certified or other
copies of such documents as the Agent may reasonably request in a form
satisfactory to the Agent.
REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The Borrower represents and warrants to the Agent and the Banks that
(a) each and every one of the representations and warranties made by the
Borrower to the Agent and the Banks in Section 6 or elsewhere in the Credit
Agreement or in the other Loan Documents, as amended by this Seventh Amendment,
are true and correct in all material respects on and as of the date hereof
except to the extent that any of such representations and warranties relate, by
the express terms thereof, solely to a date prior hereto; (b) the Borrower has
duly and properly performed, complied with and observed each of its covenants,
<PAGE>
agreements and obligations contained in Sections 7 and 8 or elsewhere in the
Credit Agreement or the other Loan Documents, as amended by this Seventh
Amendment; and (c) no event has occurred or is continuing and no condition
exists which constitutes a Default or Event of Default.
RATIFICATION, ETC.
Except as expressly amended by this Amendment, the Credit Agreement and the
Loan Documents and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Borrower confirms and agrees that the Obligations of the Borrower to the Banks
under the Loan Documents, as amended and supplemented hereby, are secured by,
guarantied under, and entitled to the benefits, of the Security Documents. The
Borrower, the Guarantor, the Agent and the Banks hereby acknowledge and agree
that all references to the Credit Agreement and the Obligations thereunder
contained in any of the Loan Documents shall be references to the Credit
Agreement and the Obligations, as affected and increased hereby and as the same
may be amended, modified, supplemented, or restated from time to time. The
Security Documents and the perfected first priority security interests of the
Banks thereunder shall continue in full force and effect, and the collateral
security and guaranties provided for in the Security Documents shall not be
impaired by this Amendment. The Credit Agreement and this Seventh Amendment
shall be read and construed as a single agreement.
MISCELLANEOUS.
<PAGE>
The Borrower hereby agrees to pay to the Agent, on demand by the Agent, all
reasonable out-of-pocket costs and expenses incurred or sustained by the Agent
or any of the Banks in connection with the preparation of this Seventh Amendment
and the documents referred to herein (including reasonable legal fees). Nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligation of the Borrower or any rights of the Agent or
either of the Banks consequent thereon. This Seventh Amendment may be executed
in one or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument. Section headings in this
Seventh Amendment are included herein for convenience of reference only and
shall not constitute part of this Seventh Amendment for any other purpose. This
Seventh Amendment shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Massachusetts (without reference to conflict of
laws).
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Seventh
Amendment as a sealed instrument as of the date first set forth above.
HPSC, INC.
By: /s/ John Everets, Jr.
---------------------------
John Everets, Jr.
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: /s/ Roberta Keeler
---------------------------
Roberta Keeler
BANK OF AMERICA ILLINOIS,
individually and as co-agent
By: /s/ Mark N. Hurley
---------------------------
Mark N. Hurley
CONSENTED TO BY THE UNDERSIGNED GUARANTOR:
<PAGE>
AMERICAN COMMERCIAL
FINANCE CORPORATION
By: /s/ John Everets, Jr
---------------------------
John Everets, Jr
<PAGE>
EXHIBIT 10.31
PURCHASE AND CONTRIBUTION AGREEMENT
Dated as of January 31, 1995
Between
HPSC BRAVO FUNDING CORP.
AS THE BUYER
and
HPSC, INC.
AS THE SELLER AND AS SERVICER
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. . . . . . . . . . . 1
SECTION 1.02. Other Terms. . . . . . . . . . . . . . . . 1
SECTION 1.03. Computation of Time Periods. . . . . . . . 1
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Agreement to Sell and Contribute . . . . . 2
SECTION 2.02. Purchases from the Seller. . . . . . . . . 3
SECTION 2.03. Servicing of Contracts and Equipment . . . 4
SECTION 2.04. Transfer of Records. . . . . . . . . . . . 4
SECTION 2.05. Collections; Deemed Collections. . . . . . 4
SECTION 2.06. Payments and Computations, Etc.. . . . . . 6
SECTION 2.07. Perfection of Liens; Further Assurances. . 6
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase . 7
SECTION 3.02. Conditions Precedent to All Purchases. . . 8
SECTION 3.03. Effect of Payment of Purchase Price. . . . 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller . . . . . . . . . . . . . . . . . . 9
ARTICLE V
GENERAL COVENANTS OF THE SELLER
-i-
<PAGE>
SECTION PAGE
SECTION 5.01. Affirmative Covenants of the Seller. . . . 16
SECTION 5.02. Reporting Requirements of the Seller . . . 19
SECTION 5.03. Negative Covenants of the Seller . . . . . 20
SECTION 5.04. Financial Covenants of the Seller. . . . . 23
-ii-
<PAGE>
SECTION PAGE
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Servicer. . . . . . . . . . 25
SECTION 6.02. Duties of the Servicer . . . . . . . . . . 25
SECTION 6.03. Rights of the Buyer. . . . . . . . . . . . 28
SECTION 6.04. Further Action Evidencing Transfers. . . . 29
SECTION 6.05. Responsibilities of the Seller . . . . . . 29
SECTION 6.06. Administration of Collections by Servicer. 30
SECTION 6.07. Application of Collections . . . . . . . . 30
SECTION 6.08. Servicing Fee. . . . . . . . . . . . . . . 30
SECTION 6.09. Resignation; Successor Servicer. . . . . . 31
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. . . . . . . . . . . 32
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Seller. . . . . . . . . 34
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. . . . . . . . . . . . . . 36
SECTION 9.02. Notices, Etc.. . . . . . . . . . . . . . . 36
SECTION 9.03. No Waiver; Remedies. . . . . . . . . . . . 37
SECTION 9.04. Binding Effect; Assignability. . . . . . . 37
SECTION 9.05. GOVERNING LAW; WAIVER OF JURY TRIAL. . . . 38
SECTION 9.06. Costs, Expenses and Taxes. . . . . . . . . 38
SECTION 9.07. Execution in Counterparts; Severability. . 39
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LIST OF EXHIBITS
EXHIBIT A List of Contracts
EXHIBIT B Form of Notice of Assignment
EXHIBIT C Form of Settlement Report
EXHIBIT D Description of Credit and Collection Policy
EXHIBIT E Form of Opinion(s) of Counsel for Seller
EXHIBIT F List of Offices of Seller where Records Are Kept
EXHIBIT G Form of Lock-Box Agreement
EXHIBIT H List of Lock-Box Banks
EXHIBIT I Trade Names and Assumed Names
EXHIBIT J List of Computer Software
EXHIBIT K-1 Form of Lease
EXHIBIT K-2 Form of Conditional Sales Agreement
EXHIBIT K-3 Form of Leasehold Improvement Note
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S&A DRAFT 2/1/95
PURCHASE AND CONTRIBUTION AGREEMENT
Dated as of January 31, 1995
HPSC BRAVO FUNDING CORP., a Delaware corporation (the "Buyer"), and
HPSC, INC., a Delaware corporation, (the "Seller") agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and
used throughout this Agreement (in addition to those defined above) are defined
in the "Definitions List" (as defined in Article I of this Agreement).
(2) The Seller wishes to sell, contribute and assign to the Buyer all
right, title and interest of the Seller in, to and under the Transferred Assets
and the Buyer, subject to the terms wishes to purchase, accept and acquire from
the Seller such Transferred Assets.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. (a) As used in this Agreement,
capitalized terms used herein shall, unless otherwise defined herein, have the
meanings assigned to them in the Definitions List dated as of the date hereof
that refers to this Agreement (the "DEFINITIONS LIST"), the terms of which are
incorporated herein by reference (such meanings to be equally applicable to both
the singular and plural forms of the terms defined).
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to Sections, subsections, Schedules and
Exhibits of this Agreement unless otherwise specified.
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SECTION 1.02. OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.
SECTION 1.03. COMPUTATION OF TIME PERIODS. Unless otherwise stated
in this Agreement, in the computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding."
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ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. AGREEMENT TO SELL AND CONTRIBUTE. (a) On the terms
and conditions hereinafter set forth, the Seller hereby agrees, from time to
time until the Termination Date, to sell in part and to contribute in part to
the Buyer, and the Buyer hereby agrees, from time to time until the Termination
Date, to purchase and acquire from the Seller, all of the Seller's right, title
and interest in, to and under the Receivables, the Contracts, all Equipment, all
Related Security with respect to the foregoing, and all Collections and other
proceeds of the foregoing. Except as provided in the immediately succeeding
sentence, nothing contained in this Agreement is intended to, nor shall it be
deemed to, constitute a commitment on the part of the Seller or on the part of
the Buyer to consummate any Purchase hereunder, it being understood that all
such Purchases shall be made at the discretion of each such party but otherwise
subject to the terms and conditions set forth herein. Notwithstanding the
foregoing, the Buyer agrees, subject to the satisfaction of the conditions set
forth in SECTION 3.02, to consummate any Purchase requested by the Seller
pursuant to SECTION 2.02(B) for which the notice of purchase specifies that the
entire Purchase Price shall be paid as a contribution to the Buyer's capital and
not in cash. Nothing contained in this Agreement is intended to, nor shall it
be deemed to, constitute an assumption by the Buyer of any obligation under any
Contract, all of which obligations shall be retained by the Seller, and the
Seller hereby agrees to perform all such obligations.
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(b) It is the intent of the Seller and the Buyer that the transfer by
the Seller to the Buyer of the Transferred Assets constitute a sale, in part,
and a contribution to capital, in part, which sales and contributions are
absolute and irrevocable, without recourse except as otherwise provided in this
Agreement, and will provide the Buyer with full ownership of the Transferred
Assets. Each of Seller and the Buyer hereby agrees to treat such transfer as a
sale and a contribution for tax, reporting and accounting purposes (except to
the extent that such transfer is not recognized due to the reporting of taxes on
a consolidated basis where applicable and the application of consolidated
financial reporting principles under GAAP). The Seller agrees to respond to any
inquiries with respect to the transfer hereunder by confirming the sale and
contribution of the Receivables, Contracts and the Equipment to the Buyer, and
to note on its financial statements that such Receivables, Contracts and
Equipment have been sold and/or contributed to the Buyer.
SECTION 2.02. PURCHASES FROM THE SELLER.
(a) On the Closing Date, the Seller shall sell to the Buyer, and the
Buyer shall purchase from the Seller, all of the Transferred Assets arising
under or in connection with the Contracts described on EXHIBIT A hereto in
consideration of which the Buyer will pay to the Seller $8,000.000 in cash. The
remaining portion of such Transferred Assets shall be a contribution to the
capital of the Buyer in return for 999 shares of the capital stock of the Buyer.
(b) Each Purchase subsequent to the Closing Date shall be made on a
Settlement Date upon not less than three Business Days' prior written notice to
the Buyer requesting such Purchase, which notice shall contain a supplemental
EXHIBIT A hereto setting forth a list of the Contracts to be transferred to the
Buyer on such Settlement Date. Each such notice of a proposed Purchase shall
accompany a Settlement Report and shall specify that portion of the Purchase
Price which is payable in cash for the Transferred Assets to be transferred.
Such notice shall be accompanied by a certification from the Seller that, after
giving effect to the Purchase proposed in such notice, the conditions set forth
in SECTION 3.02 hereto shall have been satisfied. The purchase price (the
"PURCHASE PRICE") for the new
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Transferred Assets included in any Purchase shall be agreed to in writing by the
Buyer and the Seller on or before the applicable Settlement Date and shall be an
amount not less than 95% nor more than 100% TIMES the aggregate Discounted
Receivables Balance of the Receivables included in such Purchase.
(c) Except as otherwise provided below in this SECTION 2.02, the
Purchase Price for the Transferred Assets sold by the Seller under this
Agreement shall be payable in full in cash by the Buyer, in each case on the
date of each such Purchase, except that the Buyer may, with respect to any
Purchase, offset against such Purchase Price any amounts owed by the Seller to
the Buyer hereunder and which remain unpaid. On the date of each Purchase, the
Buyer shall, upon satisfaction of the applicable conditions set forth in
Article III, make available to the Seller the portion of the Purchase Price
payable in cash referred to above in same day funds.
(d) If, on any Settlement Date, the Buyer has insufficient funds to
pay in full the Purchase Price owed on such day, then the Buyer shall so notify
the Seller prior to consummating such Purchase and the Seller shall, by
accepting the cash proceeds tendered by the Buyer, be deemed to have contributed
to the capital of the Buyer Transferred Assets having a Purchase Price equal to
the otherwise unpaid portion of the total Purchase Price otherwise owed on such
day.
(e) Promptly after each Purchase hereunder (including the initial
Purchase), the Seller will send to each Obligor under the Contracts included in
such Purchase, with the next invoice sent to such Obligor, a Notice of
Assignment, substantially in the form attached hereto as EXHIBIT B, which shall,
inter alia, advise such Obligor of the absolute transfer by the Seller to the
Buyer of that Obligor's Contract, including the Receivables due thereunder, and
any related Equipment.
SECTION 2.03. SERVICING OF CONTRACTS AND EQUIPMENT. In connection
with the contribution, assignment, transfer, sale and conveyance of the
Transferred Assets to the Buyer, the Seller hereby agrees to service the
Contracts and Equipment for the benefit of the Buyer and its successors and
assigns in accordance with the terms and provisions of ARTICLE VI hereof.
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SECTION 2.04. TRANSFER OF RECORDS. (a) The transfer of Transferred
Assets hereunder shall include the transfer to the Buyer of all of the Seller's
right and title to and interest in the Records relating to such Transferred
Assets, which transfer shall be effected automatically on the Purchase Date for
such Transferred Assets without any further documentation. In connection with
such transfer, the Seller hereby grants to the Buyer an irrevocable, non-
exclusive license to use, without royalty or payment of any kind, all software
used by the Seller to account for the Receivables and the Contracts, to the
extent necessary to administer the Transferred Assets, whether such software is
owned by the Seller or is owned by others and used by the Seller under license
agreements with respect thereto, such use to be subject to the terms and
conditions of any such license agreements with third parties where applicable.
The license granted hereby shall be irrevocable, and shall terminate on the date
on which the aggregate Receivables Balance shall have been reduced to zero.
(b) The Seller shall take such action requested by the Buyer, from
time to time hereafter, that may be necessary or appropriate to ensure that the
Buyer and its assigns have (i) an enforceable ownership interest in the Records
relating to the Transferred Assets and (ii) an enforceable right (whether by
license or sublicense or otherwise) to use all of the computer software used to
account for the Transferred Assets and/or to recreate such Records, such use to
be subject to the terms and conditions of any license agreements with third
parties pursuant to which the Seller has the right to use the applicable
computer software.
SECTION 2.05. COLLECTIONS; DEEMED COLLECTIONS. (a) Any Collections
of Receivables received (or deemed to have been received) by the Seller shall be
remitted directly to the Buyer by depositing such Collections in the Lock-box
Account within one Business Day of Seller's receipt.
(b) If on any day the Outstanding Balance of any Receivable is either (i)
reduced or adjusted as a result of any defective, rejected, returned,
repossessed or foreclosed merchandise, any defective or rejected services, any
cash discount or any other adjustment made or performed by the Seller or any
other Person (including, without limitation, those described in the definition
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of "DILUTION FACTORS"), or (ii) reduced or cancelled as a result of a setoff in
respect of any claim by the Obligor thereof against the Seller or any other
Person (whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Seller shall be deemed to have received on such day
a Collection of such Receivable in the amount of such reduction, cancellation or
adjustment. If on any day any of the representations or warranties in the first
sentence of SECTION 4.01(h) is no longer true with respect to a Receivable or if
the Seller has breached its obligations under Section 5.01(j), then the Seller
shall be deemed to have received on such day a Collection of such Receivable:
(x) if such representation, warranty or covenant relates to the non-existence of
any Adverse Claims, the Seller shall be deemed to have received a Collection of
such Receivable in the dollar amount of the Adverse Claims attaching thereto and
(y) if such representation or warranty relates to the validity or perfection of
the transfer of such Receivable under this Agreement or the perfection of the
Buyer's security interest in any Equipment as against the Obligor thereunder,
then the Seller be deemed to have received a Collection of such Receivable in an
amount equal to the Outstanding Balance thereof. To the extent that any such
deemed Collection reduces the Outstanding Balance of such Receivable to zero,
then, upon the Seller's payment to the Buyer of such deemed Collection, the
Buyer shall re-assign to the Seller all of its right, title and interest in and
to the relevant Receivable, the Contract under which such Receivable arose and
the Related Security relating thereto. Prior to the 15th day of each month (or
if such day is not a Business Day, the immediately succeeding Business Day), the
Seller shall prepare and forward to the Buyer, a Settlement Report as of the
close of business of the Seller on the last day of the immediately preceding
month, in substantially the form set forth in EXHIBIT C.
(c) Although the Seller and the Buyer agree that the Seller (except
in its capacity as Servicer pursuant to SECTION 6.02(a)), shall have no right to
so terminate, reject or not assume a Contract, if the Seller in its capacity as
Servicer (or its successor in interest, including a trustee appointed under the
Bankruptcy Code) terminates, rejects or does not assume a Contract, in whole or
in part, prior to the expiration of the original term of such Contract, whether
such rejection, termination or non-assumption is made pursuant to an equitable
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cause, statute, regulation, judicial proceeding or other applicable law
(including, without limitation, Section 365 of the Bankruptcy Code), then (i)
the Seller shall be deemed to have received Collections with respect to
Receivables arising under such Contract in an amount equal to (A) in the event
of a prepayment or termination consented to by the Seller at the Obligor's
request, the excess, if any, of the Termination Amount over all amounts paid by
the Obligor on account of such termination or (B) in the event of any other
rejection or non-assumption, the amount, of the Outstanding Balance thereof that
has not been, or may not be paid as a result of such rejection, termination or
non-assumption. Upon the Seller's payment of any such deemed Collections
described in this SECTION 2.05(c), the Buyer shall re-assign to the Seller all
of its right, title and interest in and to the relevant Receivable or
Receivables, the Contracts under which such Receivable(s) arose and the Related
Security relating thereto.
SECTION 2.06. PAYMENTS AND COMPUTATIONS, ETC. Except as otherwise
provided herein, all amounts to be paid or deposited by the Seller hereunder
shall be paid or deposited in accordance with the terms hereof no later than
11:00 A.M. (New York City time) on the day when due in lawful money of the
United States of America in immediately available funds to a special account in
the name of Buyer and maintained at Bank of Boston. The Seller shall, to the
extent permitted by law, pay to the Buyer interest on all amounts not paid or
deposited when due hereunder (whether owing by the Seller individually or as
Servicer) at 2% per annum above the Base Rate, payable on demand; PROVIDED,
HOWEVER, that such interest rate shall not at any time exceed the maximum rate
permitted by applicable law. All computations of interest and other fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed.
SECTION 2.07. PERFECTION OF LIENS; FURTHER ASSURANCES. Upon the
request of the Buyer, the Seller shall, at its expense, promptly execute and
deliver all further instruments and documents, and take all further action
(including, without limitation, the execution and filing of such financing or
continuation statements, or amendments thereto or assignments thereof), that may
be necessary or desirable, or that the Buyer may request, in order to (i)
perfect and protect any security
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interest granted or purported to be granted by an Obligor under any Contract and
(ii) perfect and protect any ownership or security interest granted or purported
to be granted to the Buyer hereunder or (iii) to enable the Buyer to exercise
and enforce its rights and remedies hereunder with respect to any Transferred
Assets; PROVIDED that the Seller shall not be required to file financing
statements to maintain the effectiveness of previously filed financing
statements with respect to any Eligible Receivables the Outstanding Balance of
which has been reduced below $5,000 so long as the aggregate Outstanding Balance
of Receivables for which no such financing statements are in effect at any time
remains less than 10% of the Discounted Receivables Balance. The Seller hereby
authorizes the Buyer to file one or more financing or continuation statements,
and amendments thereto and assignments thereof, relative to all or any part of
the Transferred Assets now existing or hereafter arising without the signature
of the Seller where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Transferred Assets or any part thereof shall be sufficient as a financing
statement. The Seller will furnish to the Buyer from time to time statements
and schedules further identifying and describing the Transferred Assets and such
other reports in connection with the Transferred Assets as the Buyer may
reasonably request, all in reasonable detail.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial
Purchase shall be subject to the condition precedent that the Buyer shall have
received the following, each in form and substance satisfactory to the Buyer:
(a) The Certificate for the Buyer;
(b) This Agreement executed by the Buyer and the Seller;
(c) Acknowledgment copies of proper UCC-1 Financing Statements
executed by the Seller, as may be necessary or, in the
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opinion of the Buyer, desirable under the UCC of all appropriate jurisdictions
or any comparable law to perfect the Buyer's interests in all Receivables,
Contracts and Related Security in which an interest may be assigned to it
hereunder;
(d) Certified copies of Requests for Information or Copies (Form UCC-
11) (or a similar search report certified by a party acceptable to the Buyer),
dated a date reasonably near to the date hereof, listing all effective financing
statements which name the Seller (under its present name and any previous names)
as debtor and which are filed in the jurisdictions in which filings were made
pursuant to subsection (c) of this SECTION 3.01, together with copies of such
financing statements;
(e) Acknowledgment copies of proper financing statements (Form
UCC-3), if any, necessary to release all security interests and other rights of
any Person in the Receivables, Related Security and other Transferred Assets
previously granted by the Seller;
(f) A copy of the resolutions of the Board of Directors of the Seller
approving this Agreement and the other Facility Documents to be delivered by it
hereunder and the transactions contemplated hereby, certified by its Secretary
or Assistant Secretary;
(g) The Certificate of Incorporation of the Seller certified by the
Secretary of State of Delaware;
(h) Good Standing Certificates for the Seller issued by the
Secretaries of State of Delaware and Massachusetts;
(i) A certificate of the Secretary or Assistant Secretary of the
Seller certifying (i) the names and true signatures of the officers authorized
on its behalf to sign this Agreement and the other Facility Documents to be
delivered by it hereunder (on which certificate the Buyer (and the Collateral
Agent) may conclusively rely until such time as the Buyer (and the Collateral
Agent) shall receive from the Seller a revised certificate meeting the
requirements of this subsection (h)) and (ii) a copy of the Seller's by-laws;
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(j) The Lock-Box Agreements with the Lock-Box Banks in each case,
executed by the Seller and the Buyer and acknowledged and agreed to by the
applicable Lock-Box Bank together with an acknowledgment and authorization
executed by the Collateral Agent, and acknowledged and agreed to by the
applicable Lock-Box Bank;
(k) Copies of all written agreements, if any, between each Lock-Box
Bank and Seller with respect to the opening or operation of the Lock-Box
Accounts; and
(l) An opinion of Hill & Barlow, counsel to the Seller, in
substantially the form of EXHIBIT E and as to such other matters as the Buyer
may reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL PURCHASES. Each Purchase
(including the initial Purchase) by the Buyer from the Seller shall be subject
to the further conditions precedent that (a) with respect to any such Purchase,
on or prior to the date of such Purchase, the Seller shall have delivered to the
Buyer (i) in form and substance satisfactory to the Buyer, a completed
Settlement Report as of the end of the immediately preceding calendar month and
containing such additional information as may be reasonably requested by the
Buyer, (ii) a notice of purchase and list of the Contracts to be purchased as
provided in SECTION 2.02(b), (iii) a completed Certificate with respect to such
Contracts and (iv) a notice from the Custodian in substantially the form of
Exhibit A to the Custodial Agreement confirming that the Custodian has received
the Contract Files for each Contract to be included in such Purchase; (b) on the
date of such Purchase the following statements shall be true and the Seller by
accepting the cash portion of the Purchase Price shall be deemed to have
certified that:
(i) The representations and warranties contained in SECTION 4.01
are correct on and as of such day as though made on and as of such
date and
(ii) No event has occurred and is continuing, or would result
from such Purchase which constitutes an Event of Termination or would
constitute an Event of Termination but for the requirement that notice
be given or time elapse or both;
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and (c) the Buyer shall have received such other approvals or documents as the
Buyer may reasonably request.
SECTION 3.03. EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment
of the Purchase Price for any Purchase, (whether in cash or through a capital
contribution), title to the related Transferred Assets shall vest in the Buyer,
whether or not the conditions precedent to such Purchase were in fact satisfied;
PROVIDED, HOWEVER, that the Buyer shall not be deemed to have waived any claim
it may have under this Agreement for the failure by the Seller in fact to
satisfy any such condition precedent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
Seller represents and warrants as follows:
(a) DUE INCORPORATION AND GOOD STANDING. The Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction named at the beginning hereof and is duly qualified to do business,
and is in good standing, in every jurisdiction in which the nature of its
business requires it to be so qualified, except where the failure to be so
qualified would not materially adversely affect (i) the interests hereunder of
the Buyer, (ii) the collectibility of any Receivable, (iii) the business,
properties, operations, prospects, profits or condition (financial or otherwise)
of the Seller or (iv) the ability of the Seller (individually or as Servicer) to
perform its obligations hereunder.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
performance by the Seller of this Agreement, the Certificate, and all other
agreements, instruments and documents to be delivered hereunder, and the
transactions contemplated hereby and thereby (including the sale and
contribution to the Buyer of the Transferred Assets contemplated hereunder), are
within the Seller's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene (i) the Seller's charter or by-laws, (ii)
any law, rule or regulation
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applicable to the Seller, (iii) any contractual restriction contained in any
material indenture, loan or credit agreement, lease, mortgage, security
agreement, bond, note, or other agreement or instrument binding on or affecting
the Seller or its property or (iv) any order, writ, judgment, award, injunction
or decree binding on or affecting the Seller or its property, and do not result
in or require the creation of any Adverse Claim upon or with respect to any of
its properties (other than in favor of the Buyer as contemplated hereunder); and
no transaction contemplated hereby requires compliance with any bulk sales act
or similar law. This Agreement and the Certificate have been duly executed and
delivered on behalf of the Seller.
(c) GOVERNMENTAL AND OTHER CONSENTS. Except for the filing of
financing statements pursuant to the UCC required to perfect the sales of
accounts and chattel paper under this Agreement and the security interests
granted under the Credit Agreement or under the other Facility Documents and
except for consents under certain contractual agreements which have been
obtained, no authorization, consent, approval or other action by, and no
registration, qualification, designation, declaration, notice to or filing with,
any governmental authority or other Person is or will be necessary in connection
with the execution and delivery of this Agreement, the Certificate or any other
Facility Document to which the Seller is a party, or any of the other documents
contemplated hereby or thereby, consummation of the transactions herein or
therein contemplated, or performance of or compliance with the terms and
conditions hereof or thereof, to ensure the legality, validity or enforceability
hereof or thereof.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement, the
Certificate and each other Facility Documents to be delivered by the Seller in
connection herewith constitute the legal, valid and binding obligations of the
Seller enforceable against the Seller in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency or similar
laws relating to or affecting creditors' rights generally and by equitable
principles.
(e) FINANCIAL STATEMENTS. (i) The consolidated balance sheets of the
Seller and its consolidated Subsidiaries as at December 31, 1993, and the
related statements of income,
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retained earnings and cash flows of the Seller and its consolidated Subsidiaries
for the fiscal year then ended, certified by Coopers & Lybrand, independent
public accountants, and the unaudited interim consolidated balance sheets of the
Seller and its subsidiaries as of June 30, 1994 and September 30, 1994 and the
related consolidated statements of income, retained earnings and cash flows for
the six months and nine months, respectively, ending on such dates (the "Interim
Financials"), in each case fairly present the consolidated financial condition
of the Seller and its consolidated Subsidiaries as at such dates and the
consolidated results of the operations of the Seller and its consolidated
Subsidiaries for the period ended on such dates, all in accordance with GAAP,
and since December 31, 1993, there has been no material adverse change in any
such condition or operations, except as reflected in the Interim Financials.
Neither the Seller nor any of its subsidiaries has any material liabilities or
obligations other than those disclosed in the financial statements referred to
above or for which adequate reserves are reflected in such financial statements.
(f) NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Seller threatened, against or affecting the
Seller or any of its Subsidiaries, or the property of the Seller or any of its
Subsidiaries, in any court, or before any arbitrator of any kind, or before or
by any governmental body, which may materially adversely affect (i) the
business, properties, operations, prospects, profits or condition (financial or
otherwise) financial condition of the Seller or (ii) the ability of the Seller
to perform its obligations under this Agreement or the Certificate or (iii) the
collectibility of the Receivables. Neither the Seller nor any of its
Subsidiaries is in default with respect to any order of any court, arbitrator or
governmental body except for defaults with respect to orders of governmental
agencies which defaults are not material to the business or operations of the
Seller or any of its Subsidiaries or the Seller's ability to perform its
obligations hereunder.
(g) USE OF PROCEEDS. No proceeds of any Purchase will be used by the
Seller to acquire any security in any transaction which is subject to Section 13
or 14 of the Securities Exchange Act of 1934, as amended.
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(h) PERFECTION OF INTEREST IN TRANSFERRED ASSETS. Prior to the
Buyer's Purchase and/or acquisition of each Transferred Asset hereunder, the
Seller is or will be the lawful owner of, and have good title to, such
Transferred Asset free and clear of any Adverse Claim and upon each Purchase
and/or acquisition by the Buyer of Transferred Assets hereunder, the Buyer shall
acquire a valid and perfected first priority ownership interest in each
Receivable then existing or thereafter arising and in the Related Security, the
other Transferred Assets and Collections and with respect thereto, in each case
free and clear of any Adverse Claim all such Purchases of Receivables and
related Transferred Assets constitute true and valid sales, and all such
Purchases and contributions of Receivables and related Transferred Assets
constitute true and valid transfers and assignments of all of Seller's right,
title and interest in, to and under such Transferred Assets (and not merely a
pledge of such Receivables and related Transferred Assets for security
purposes), enforceable against creditors of the Seller and no such Transferred
Assets shall constitute property of the Seller; and no effective financing
statement or other instrument similar in effect covering any Receivable, the
Related Security, Collections or the other Transferred Assets shall at any time
be on file in any recording office except such as may be filed in favor of the
Buyer (or its assignees) in accordance with this Agreement.
(i) ACCURACY OF INFORMATION. No Settlement Report (if prepared by
the Seller, or to the extent that information contained therein is supplied by
the Seller), information, exhibit, financial statement, document, book, record
or report (other than forecasts required to be delivered by the Seller
hereunder) furnished or to be furnished by the Seller to the Buyer in connection
with this Agreement is or shall be inaccurate in any material respect as of the
date it is or shall be dated or (except as otherwise disclosed to the Buyer, as
the case may be, at such time) as of the date so furnished, or contains or shall
contain any material misstatement of fact or omits or shall omit to state a
material fact or any fact necessary to make the statements contained therein not
materially misleading.
(j) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief place
of business and chief executive office of the Seller are located at the address
of the Seller referred to in
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SECTION 9.02 hereof and the locations of the offices where the Seller keeps all
the Records are listed on EXHIBIT F (or at such other locations, notified to the
Buyer in accordance with SECTION 5.01(f), in jurisdictions where all action
required by SECTION 6.03 has been taken and completed).
(k) LOCK-BOX ACCOUNTS. Each Obligor under a Contract has, within
one month of the date of Purchase of such Contract, been instructed to remit
payment on the Receivables to a Post Office Box for remittance to a Lock-Box
Account or directly to a Lock-Box Account substantially in the form of EXHIBIT
G. From and after the Closing Date, the Seller will have no right, title
and/or interest to any of the Lock-Box Accounts and will maintain no lock-box
accounts in its own name for the collection of such Receivables. The Seller has
delivered to the Collateral Agent a duplicate key to each Post Office Box and
has filed a standing delivery order with the United States Postal Service
authorizing the Collateral Agent to receive mail delivered to each such Post
Office Box. The account numbers of all Lock-Box Accounts, together with the
names and addresses of all the Lock-Box Banks maintaining such Lock-Box Accounts
and the related Post Office Boxes, are specified in EXHIBIT H.
(l) NO TRADE NAMES. Except as described in EXHIBIT I, the Seller has
no trade names, fictitious names, assumed names or "doing business as" names.
(m) SEPARATE CORPORATE EXISTENCE. The Seller is entering into the
transactions contemplated by this Agreement in reliance on the Buyer's identity
as a separate legal entity from the Seller and each of its Affiliates other than
the Buyer, and acknowledges that the Buyer and the other parties to the Facility
Documents are similarly entering into the transactions contemplated by the other
Facility Documents in reliance on the Buyer's identity as a separate legal
entity from the Seller and each such other Affiliate.
(n) TAXES. The Seller has filed or caused to be filed all Federal,
state and local tax returns which are required to be filed by it, and has paid
or caused to be paid all taxes shown to be due and payable on such returns or on
any assessments received by it, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate proceedings
and
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with respect to which the Seller has set aside adequate reserves on its books in
accordance with GAAP and which have not given rise to any Adverse Claims.
(o) SOLVENCY. The Seller (i) is not "insolvent" (as such term is
defined in Section 101(32)(A) of the Bankruptcy Code, (ii) is able to pay its
debts as they mature; and (iii) does not have unreasonably small capital for the
business in which it is engaged or for any business or transaction in which it
is about to engage.
(p) NO FRAUDULENT CONVEYANCE. The transactions contemplated by this
Agreement and by each of the Facility Documents are being consummated by the
Seller in furtherance of the Seller's ordinary business, with no contemplation
of insolvency and with no intent to hinder, delay or defraud any of its present
or future creditors. By its receipt of the Purchase Prices hereunder and its
ownership of the capital stock of the Buyer, the Seller shall have received
reasonably equivalent value for the Transferred Assets sold or otherwise
conveyed to the Buyer under this Agreement.
(q) SOFTWARE. Attached as EXHIBIT J is a list of all computer
software used by the Seller to administer the Receivables and other Transferred
Assets. Each of the Buyer and the Collateral Agent, as assignee of the Buyer,
has (or will have, concurrently with the effectiveness hereof) an enforceable
right (whether by license, sublicense or assignment) to use all of the computer
software used to account for the Transferred Assets to the extent necessary to
administer the Receivables and other Transferred Assets, such use to be subject
to the terms and conditions of any license agreement for such software between
the Seller and any third parties where applicable.
(r) REPRESENTATIONS WITH RESPECT TO RECEIVABLES AND CONTRACTS. With
respect to each Receivable:
(i) Each such Receivable, at the time of Purchase thereof, is an
Eligible Receivable. Each Contract relating to a Receivable: (a) if it
constitutes a Lease, is in substantially the form of EXHIBIT K-1 hereto;
(b) if it constitutes a Conditional Sales Agreement, is in substantially
the form of EXHIBIT K-2 hereto and (c) if it
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constitutes a Leasehold Improvement Note, is in substantially the form of
EXHIBIT K-3 hereto.
(ii) There are no facts or circumstances existing as of the Purchase
Date thereof which give rise to any right of rescission, offset,
counterclaim or defense, including the defense of usury, to the obligations
of any Obligor, including the obligation of such Obligor to pay all amounts
due thereunder, with respect to any Contract to which such Obligor is a
party; and neither the operation of any of the terms of any Contract nor
the exercise of any right thereunder will render such Contract
unenforceable in whole or in part or subject to any right of rescission,
offset, counterclaim or defense, including the defense of usury (other than
limitations on enforcement which may subsequently arise as a result of
bankruptcy, insolvency, reorganization or similar laws relating to or
affecting the enforcement of creditors, rights generally and by general
equitable principles), and no such right of rescission, offset,
counterclaim or defense has been asserted with respect thereto.
(iii) As of the Cut-Off Date, (i) the aggregate Discounted
Receivables Balance of Contracts that are Leases is $5,239,644, (ii) the
aggregate Discounted Receivables Balance of Contracts that are Conditional
Sale Agreements is $2,963,452, (iii) the aggregate Discounted Receivables
Balance of Contracts that are Leasehold Improvement Notes is $1,439,116 and
(iv) the aggregate discounted book value of anticipated residuals on the
Equipment subject to Leases is, net of security deposits, $290,283.
(iv) Each Lease requires the Obligor to assume all risk of loss or
malfunction of the related Equipment. Each Lease and Conditional Sale
Agreement requires the Obligor to pay all sales, use, property, excise and
other similar taxes imposed on or with respect to the related Equipment and
permits the rights with respect to such Contract, and all collateral
related thereto, to be assigned by the Seller without the consent of any
Person. No Contract permits early termination or prepayment, unless the
amount required to be paid by or on behalf of Obligor in respect thereof is
equal to or greater than the applicable Termination Amount.
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No Contract provides for the substitution, exchange or addition of any
Equipment subject thereto which would result in any reduction of the amount
of payments or change the timing of payments due under such Contract.
(v) Each Lease requires the related Obligor to maintain the related
Equipment, if any, in good and workable order. Each Lease and Conditional
Sale Agreement requires the related Obligor to obtain and maintain physical
damage insurance on the Equipment subject thereto and to name the lessor or
lender thereunder as loss payee and an additional insured with respect
thereto. The Collateral Agent is named as loss payee under all physical
damage insurance on the Equipment that is carried by the Seller or the
Buyer. To the best of Seller's knowledge, the Equipment was properly
delivered to the Obligor in good repair, without defects and in
satisfactory order and the related Equipment, if any, is in good operating
condition and repair. To the best of the Seller's knowledge, the related
Equipment was accepted by the Obligor after reasonable opportunity to
inspect and test the same and no Obligor has informed the Seller of any
defects therein.
(vi) On each Purchase Date, after giving effect to the Purchases to
be made on such date, the aggregate Discounted Receivables Balance of all
Contracts with Obligors located in any one state does not exceed 30% of the
Discounted Receivables Balance.
(vii) On the Cut-Off Date, the Weighted Average Remaining Term of the
Contracts included in the initial Purchase was 49 months. On each
subsequent Purchase Date, after giving effect to the Purchases to be made
on such date, the Weighted Average Remaining Term does not exceed 57
months.
(viii) On the Cut-Off Date, the lowest Outstanding Balance of the
Receivables under any Contract included in the Purchases to be made on such
date is no less than $224 and the highest Outstanding Balance of the
Receivables under any Contract included in the Purchases to be made on such
date is no greater than $130,667. As of each Purchase Date, after giving
effect to the Purchases to be made on such
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date, the average Outstanding Balance of the Receivables is no greater than
$30,000.
(ix) As of the Purchase Date thereof, the Seller has delivered the
Contract File for the related Contract to the Buyer or to the Custodian on
the Buyer's behalf together with duly executed instruments of transfer or
assignment in blank for each Contract constituting an instrument or chattel
paper.
(x) As of the Purchase Date thereof, the average original terms of the
Contracts included in such Purchase does not exceed 4.75 years.
(s) OTHER INDEBTEDNESS. The Seller is not in default under any
material indenture, loan or credit agreement with respect to any Indebtedness,
the effect of which is to cause, or which would, with the giving of notice of
the lapse of time or both, permit the holder or holders thereof to cause, such
Indebtedness to become due prior to its stated maturity.
(t) INVESTMENT COMPANY. The Seller is not an "investment company" or
a company controlled by an "investment company" within the meaning of the
Investment Company Act of 1940.
(u) ERISA. Neither the Seller nor any of its ERISA Affiliates
maintains, contributes to or has any obligation to contribute to any Plan which
could reasonably be expected to, individually or in the aggregate, materially
adversely affect the ability of the Seller to perform its obligations under this
Agreement or any other Facility Document to which it is a party or which could
expose the Buyer to any material liability under ERISA. No accumulated or
waived funding deficiency (as defined in Section 302(a)(2) of ERISA or Section
412(a) of the Internal Revenue Code) exists with respect to any Benefit Plan,
and the Seller has not failed to satisfy the minimum funding requirements under
ERISA or the Internal Revenue Code with respect to any Benefit Plan. Neither
the Seller nor any of its ERISA Affiliates has incurred any liability to or on
account of a Benefit Plan or Multiemployer Plan pursuant to Section 515, 4062,
4063, 4064, 4201 or 4204 of ERISA or expects to incur any liability under any of
the foregoing sections on account of the termination of
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participation in or contributions to any such Plan or Multiemployer Plan.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE SELLER. From the Closing
Date until the later of the Termination Date or the Collection Date, the Seller
will, unless the Buyer shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to it, its
business and properties and all Receivables and related Contracts.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction except where the failure to preserve
and maintain such existence, rights, franchises, privileges and qualifications
would not materially adversely affect (i) the interests hereunder of the Buyer,
(ii) the collectibility of any Receivable, (iii) the business, properties,
operations, prospects, profits or condition (financial or otherwise) condition
of the Seller or (iv) the ability of the Seller (individually or as Servicer) to
perform its obligations hereunder and under the other Facility Documents to
which it is a party.
(c) AUDITS. At any time and from time to time upon prior written
notice to the Seller and during regular business hours, permit the Buyer and its
designees (including the Collateral Agent), or their respective agents or
representatives, (i) to examine and make copies of and abstracts from all
Records, and (ii) to visit the offices and properties of the Seller for the
purpose of examining such Records, and to discuss matters relating to the
Receivables or the Seller's performance hereunder with any of the officers or
employees of the Seller having knowledge of such matters. Each such audit shall
be at the sole
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expense of the Seller; PROVIDED, however, that so long as no Event of
Termination has occurred in any calendar year, the annual costs of the audits
during such year for which the Seller is responsible shall not exceed $22,000.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Receivables in the event of the
destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of all Collections of and adjustments to each
Receivable).
(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. At
its expense timely and fully perform and comply, in all material respects, with
all material provisions, covenants and other promises required to be observed by
it under the Contracts.
(f) LOCATION OF RECORDS. Keep its chief place of business and chief
executive office, and the offices where it keeps the Records, at the address(es)
of the Seller referred to in SECTION 4.01(j), or, in any such case, upon 30
days' prior written notice to the Buyer, at such other locations within the
United States where all action required by SECTION 2.08 and by SECTION 6.04
shall have been taken and completed.
(g) CREDIT AND COLLECTION POLICIES. Comply in all material respects
with its Credit and Collection Policy attached hereto as EXHIBIT D in regard to
each Receivable and the related Contract.
(h) COLLECTIONS. Instruct all Obligors to cause all Collections to
be deposited directly to a Post Office Box or Lock-Box Account and if the Seller
shall receive any Collections (including, without limitation, any Collections
deemed to have been received pursuant to SECTION 2.05), the Seller shall hold
such Collections in trust for the benefit of the Buyer and remit such
Collections to the Buyer by depositing such Collections into a Lock-Box Account
within one Business Day following Seller's
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identification thereof and in any event within four Business Days following
Seller's receipt thereof.
(i) COMPLIANCE WITH ERISA. Establish, maintain and operate all Plans
to comply in all material respects with the provisions of ERISA, the IRC, and
all other applicable laws, and the regulations and interpretations thereunder.
(j) PERFECTED SECURITY INTEREST UNDER CONTRACTS. Take such action
with respect to each Receivable as is necessary to ensure that the Buyer
maintains, as against the Obligor thereunder, a perfected security interest in
any Equipment relating thereto free and clear of Adverse Claims or, in the case
of any Lease, to ensure that the Buyer would maintain such a perfected priority
security interest in the event that a court or other Person were to determine
that such Lease purported to transfer to the Obligor an ownership (rather than a
leasehold) interest in the Equipment subject thereto; PROVIDED, that Seller
shall not be required to file financing statements to maintain the effectiveness
of previously filed financing statements with respect to any Eligible
Receivables the Outstanding Balance of which has been reduced below $5,000 so
long as the aggregate Outstanding Balance of Receivables for which no such
financing statements are in effect at any time remains less than 10% of the
Discounted Receivables Balance.
(k) MAINTENANCE OF INSURANCE. Maintain, or cause each Obligor to
maintain, with respect to the Contracts and the Equipment related thereto,
casualty and general liability insurance which provide at least the same
coverage as a fire and extended coverage insurance policy as is comparable for
other companies in related businesses. Such insurance policies (and self-
insurance where permitted) shall be maintained in an amount which is not less
than the Discounted Value for the Receivables arising under the relevant
Contracts. Each such casualty and liability policy if maintained by an Obligor,
shall name the Seller or the Buyer as loss payee and additional insured and the
Seller shall have assigned any such interest to the Buyer. The Seller shall
remit, or shall cause to be remitted, the proceeds of any such insurance policy
to a Lock-Box Account.
(l) SEPARATE IDENTITY. Take all actions required to maintain the
Buyer's status as a separate legal entity,
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including, without limitation, (i) not holding the Buyer out to third parties as
other than an entity with assets and liabilities distinct from the Seller and
the Seller's other Subsidiaries; (ii) not holding itself out to be responsible
for the debts of the Buyer or, other than by reason of owning capital stock of
the Buyer, for any decisions or actions relating to the business and affairs of
the Buyer; (iii) causing any financial statements consolidated with those of the
Buyer to address (by footnote or otherwise and in language reasonably
satisfactory to the Buyer and the Collateral Agent) the separate corporate
existence of the Buyer and the Buyer's ownership of the Receivables; (iv) taking
such other actions as are necessary on its part to ensure that all corporate
procedures required by its and the Buyer's respective certificates of
incorporation and by-laws are duly and validly taken; (v) keeping correct and
complete records and books of account and corporate minutes; (vi) not acting in
any other matter that could foreseeably mislead others with respect to the
Buyer's separate identity; and (vii) taking such other actions as may be
necessary on its part to ensure that the Buyer is in compliance at all times
with SECTION 5.01(l) of the Credit Agreement.
(m) TAXES. File or cause to be filed, and cause each of its
Subsidiaries with whom it shares consolidated tax liability to file, all
federal, state and local tax returns which are required to be filed by it,
except where the failure to file such returns could not reasonably be expected
to have a material adverse effect on the collectibility of the Transferred
Assets or the ability of the Seller to perform its obligations hereunder or
under any other Facility Document to which it is a party or which could
otherwise be reasonably expected to expose the Buyer to a material liability.
The Seller shall pay or cause to be paid all taxes shown to be due and payable
on such returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Seller or the applicable
subsidiary shall have set aside adequate reserves on its books in accordance
with GAAP and which proceedings could not reasonably be expected to have a
material adverse effect on the collectibility of the Transferred Assets or the
ability of the Seller to perform its obligations hereunder or under any other
Facility Document to which it is a party or which could
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otherwise be reasonably expected to expose the Buyer to a material liability.
(n) SEGREGATION OF COLLECTIONS. Prevent the deposit into any of the
Lock-Box Accounts of any funds other than Collections in respect of the
Transferred Assets and, to the extent that any such funds are nevertheless
deposited into any of such Lock-Box Accounts, promptly identify any such funds
to the Servicer for segregation and remittance to the owner thereof.
SECTION 5.02. REPORTING REQUIREMENTS OF THE SELLER. From the Closing
Date until the later of the Termination Date or the Collection Date, the Seller
will, unless the Buyer shall otherwise consent in writing, furnish to the Buyer:
(a) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Seller,
consolidated balance sheets of the Seller and its consolidated Subsidiaries as
of the end of such quarter, and consolidated statements of income and retained
earnings of the Seller and its consolidated Subsidiaries each for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, certified by the chief financial officer, chief accounting officer
or treasurer of the Seller;
(b) as soon as available and in any event within 105 days after the
end of each fiscal year of the Seller, a copy of the consolidated balance sheets
of the Seller and its consolidated Subsidiaries as of the end of such year and
the related consolidated statements of income and retained earnings of the
Seller and its consolidated Subsidiaries for such year each reported on by
nationally recognized independent public accountants acceptable to the Buyer
(the Buyer acknowledges that any of the "Big 5" accounting firms will be
acceptable to the Buyer);
(c) promptly after the sending or filing thereof, copies of all
reports which the Seller sends to any of its security holders and copies of all
reports and registration statements which the Seller files with the Securities
and Exchange Commission or any national securities exchange other than
registration statements relating to employee benefit plans and to registrations
of securities for selling security holders;
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(d) as soon as possible and in any event within five Business Days
after the occurrence of each Event of Termination or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of
Termination, the statement of the chief financial officer, chief accounting
officer or treasurer of the Seller setting forth details of such Event of
Termination or event and the action which the Seller proposes to take with
respect thereto;
(e) promptly after the filing or receiving thereof, copies of all
reports and notices with respect to any Reportable Event defined in Article IV
of ERISA which the Seller or any Subsidiary of the Seller files under ERISA with
the IRS or the PBGC or the DOL or which the Seller or any Subsidiary of the
Seller receives from the PBGC;
(f) promptly, from time to time, such other information, documents,
records or reports respecting the Receivables or the conditions or operations,
financial or otherwise, of the Seller or any Subsidiary of the Seller as the
Buyer may from time to time reasonably request in order to protect the interests
of the Buyer under or as contemplated by this Agreement.
SECTION 5.03. NEGATIVE COVENANTS OF THE SELLER. From the Closing
Date until the later of the Termination Date or the Collection Date, the Seller
will not, without the written consent of the Buyer:
(a) SALES, LIENS, ETC. AGAINST RECEIVABLES AND TRANSFERRED ASSETS.
Except as otherwise provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist, any Adverse
Claim upon or with respect to, any Receivable, Related Security or Collections,
or any related Contract, or upon or with respect to any Lock-Box Account to
which any Collections of any Receivable are sent, or assign any right to receive
income in respect thereof, or upon any other Transferred Asset, except that the
Seller shall have no responsibility for any Adverse Claim created by an Obligor
upon or with respect to any Equipment owned by such Obligor so long as such
Adverse Claim is subordinate to the security interest of the Seller in such
Equipment.
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(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Extend, amend or
otherwise modify, the terms of any Receivable, or amend, modify or waive, any
term or condition of any Contract related thereto, except to the extent that the
Seller, in its capacity as Servicer, may make such amendments in accordance with
the Credit and Collection Policy or as otherwise permitted under ARTICLE VI
hereof.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Without the
prior written consent of the Collateral Agent, make any material change in the
character of its business or make any change in the Credit and Collection
Policy, which change would, in either case, impair the collectibility of any
Transferred Asset.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. (i) After giving the
payment instructions described in the first sentence of SECTION 4.01(k), make
any change in such instructions to Obligors regarding payments to be made to the
Buyer or payments to be made to any Lock-Box Bank or (ii) add or terminate any
bank as a Lock-Box Bank from those listed in EXHIBIT H unless the Buyer shall
have received (A) ten Business Days' prior notice of such addition, termination
or change and (B) prior to the effective date of such addition, termination or
change, (x) executed copies of Lock-Box Agreements executed by each new Lock-Box
Bank and (y) copies of all agreements and documents signed by the Seller or the
respective Lock-Box Bank with respect to any new Lock-Box Account.
(e) MERGER ETC. (i) Merge with or into or consolidate with or into
or convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) or acquire all or substantially all of the
assets or capital stock or other ownership interest of, any Person, or permit
any Subsidiary of Seller to do so, except that (A) any Subsidiary of Seller may
merge or consolidate with or transfer assets to or acquire assets from any other
Subsidiary of Seller, (B) any Subsidiary of Seller may merge into or transfer
assets to the Seller or any other Person and (C) the Seller or any Subsidiary of
the Seller may acquire the capital stock or assets of any other Person, provided
in each case that immediately after giving effect to such proposed transaction,
no
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Event of Termination or event which, with the giving of notice or lapse of time,
or both, would constitute an Event of Termination, would exist, and in the case
of any such merger to which the Seller is a party, the Seller is the surviving
corporation.
(f) CHANGE IN CORPORATE NAME. Make any change to its corporate name
or use any trade names, fictitious names, assumed names or "doing business as"
names other than those described in EXHIBIT I, unless the Seller has given to
the Buyer at least thirty (30) days' prior written notice thereof and, prior to
the effective date of any such name change or use, Seller delivers to the Buyer
such Financing Statements (Form UCC-1 and UCC-3) executed by Seller which the
Buyer may reasonably request to reflect such name change or use, together with
such other documents and instruments that the Buyer may request in connection
therewith.
(g) ERISA MATTERS. (i) Engage or permit any ERISA Affiliate to
engage in any prohibited transaction for which an exemption is not available or
has not previously been obtained from the DOL; (ii) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the IRC, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make any payments to any
Multiemployer Plan that the Seller or any ERISA Affiliate may be required to
make under the agreement relating to such Multiemployer Plan or any law
pertaining thereto; (iv) terminate any Benefit Plan so as to result in any
liability; or (v) permit to exist any occurrence of any reportable event
described in Title IV of ERISA which represents a material risk of a liability
of the Seller or any ERISA Affiliate under ERISA or the IRC; PROVIDED, HOWEVER,
the Seller and its ERISA Affiliates may take or allow such prohibited
transactions, accumulated funding deficiencies, payments, terminations and
reportable events described in clauses (i) through (iv) above so long as such
events occurring within any fiscal year of the Seller, in the aggregate, involve
a payment of money by or an incurrence of liability of the Seller or any ERISA
Affiliate (collectively, "ERISA Liabilities") in an amount which does not exceed
$500,000.
(h) TERMINATE OR REJECT CONTRACTS. Without limiting SECTION 5.03(b)
and except as otherwise expressly permitted
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pursuant to SECTION 2.05, terminate or reject any Contract prior to the term of
such Contract, whether such rejection or early termination is made pursuant to
an equitable cause, statute, regulation, judicial proceeding or other applicable
law (including, without limitation, Section 365 of the Bankruptcy Code), unless
prior to such termination or rejection, the Seller shall have paid to the Buyer
an amount equal to the Termination Amount thereof.
(i) ACCOUNTING TREATMENT. Prepare any financial statements or other
statements which shall account for the transactions contemplated by this
Agreement in any manner other than as the sale of, or a capital contribution of,
the Transferred Assets by the Seller to the Buyer (it being understood that non-
recognition of such transaction due to the application of consolidated financial
reporting principles under GAAP or the filing of tax returns on a consolidated
basis shall not constitute a violation of this covenant).
(j) CERTIFICATE OF INCORPORATION. Cause the Buyer to amend its
Certificate of Incorporation or By-laws in any manner which would require the
consent of the Buyer's independent director or directors, without the Collateral
Agent's prior written consent.
SECTION 5.04. FINANCIAL COVENANTS OF THE SELLER.
(a) From the Closing Date until the later of the Termination Date or
the Collection Date, the Seller will not suffer or permit:
(i) "Consolidated Tangible Net Worth" (as defined below) as of the
end of any fiscal quarter to be less than the sum of (i) $30,000,000 PLUS
(ii) on a cumulative basis, 75% of positive "Consolidated Net Income" (as
defined below) for each fiscal quarter beginning with the fiscal quarter
commencing on or after June 26, 1994, PLUS (iii) 100% of the proceeds of
any sale (other than up to $4,000,000 of proceeds from the Borrower's
resale of 949,182 shares of common stock purchased under that certain Stock
Purchase Agreement with Chemical Bank and the Trustee for Healthco
International, Inc. (the "Stock Purchase Agreement")) by the Seller or any
of its Consolidated Subsidiaries of (A) equity
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securities issued by the Seller or any of its Consolidated Subsidiaries, or
(B) warrants or subscription rights for equity securities issued by the
Borrower or any of its Consolidated Subsidiaries MINUS (iv) up to
$5,000,000 of the total stock purchase price under the Stock Purchase
Agreement used to purchase shares which are held by the Seller as treasury
shares or retired.
(ii) Indebtedness of the Seller and its Consolidated Subsidiaries at
the end of any fiscal quarter to exceed four hundred percent (400%) of the
sum of (a) Consolidated Tangible Net Worth plus (B) the outstanding amount
of any unsecured Indebtedness expressly subordinated and made junior to the
payment of the Seller's revolving bank credit facilities, in each case at
the end of such fiscal quarter.
(iii) The ratio of (A) "Consolidated EBIT" (as defined below) to (B)
"Total Interest Expense" (as defined below), as of the end of any fiscal
quarter, to be less than (1) 1.2 to 1.0 for the four fiscal quarter period
then ending.
(b) As used in this SECTION 5.04, the following terms shall have the
following meanings:
"CONSOLIDATED EBIT" for any period means the consolidated earnings (or
loss) from the operations of the Seller and its Consolidated Subsidiaries
after all expenses and other proper charges but before payment or provision
for income taxes or interest expense for such period, as determined in
accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the consolidated
net income (or deficit) of the Seller and its Consolidated Subsidiaries,
after deduction of all expenses, taxes and other proper charges, for such
period as determined in accordance with GAAP, after eliminating therefrom
all extraordinary nonrecurring items of income.
"CONSOLIDATED SUBSIDIARIES" means all of the Subsidiaries of the
Seller consolidated for financial reporting purposes in accordance with
GAAP, but excluding Credident, Inc., a Canadian corporation, whether or not
such
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Subsidiary should be so consolidated for financial reporting purposes.
"CONSOLIDATED TANGIBLE NET WORTH" means the excess of (i) total assets
of the Seller and its Consolidated Subsidiaries as determined in accordance
with GAAP MINUS (ii) total liabilities of the Seller and its Consolidated
Subsidiaries as determined in accordance with GAAP and any Indebtedness of
the Seller and its Consolidated Subsidiaries (whether or not classified as
liabilities) MINUS (iii) the total book value of all assets of the Seller
and its Consolidated Subsidiaries properly classified as intangible assets
under generally accepted accounting principles, including such items as
good will, the purchase price of acquired assets in excess of the fair
market value thereof, trademarks, trade names, service marks, brand names,
copyrights, patents and licenses, and rights with respect to the foregoing
MINUS (iv) all amounts representing any write-up in the book value of any
assets of the Seller or its Consolidated Subsidiaries resulting from a
revaluation thereof subsequent to December 25, 1993, excluding adjustments
to translate foreign assets and liabilities for changes in foreign exchange
rates made in accordance with Financial Accounting Standards Board
Statement No. 52, PLUS (v) to the extent otherwise includable in the
computation of Consolidated Tangible Net Worth, any subscriptions
receivable; PLUS (vi) deferred underwriting expenses and deferred
origination costs.
"TOTAL INTEREST EXPENSE" means for any period the aggregate amount of
interest required to be paid or accrued by the Seller and its Consolidated
Subsidiaries during such period in respect of Indebtedness, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of
capitalized leases and including commitment fees, agency fees, facility
fees, balance deficiency fees and similar fees or expenses in connection
with such Indebtedness.
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ARTICLE VI
ADMINISTRATION AND COLLECTION
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SECTION 6.01. DESIGNATION OF SERVICER. Consistent with the Buyer's
ownership of the Transferred Assets, the Buyer shall have as against the Seller
the sole right to service, administer and collect the Receivables, to assign
such right and to delegate such right. The servicing, administering and
collection of the Receivables and the other Transferred Assets shall be
conducted by the Person (the "SERVICER") so designated by the Buyer from time to
time in accordance with this SECTION 6.01. Until the Collateral Agent gives
notice to the Seller of the designation of a new Servicer, the Seller is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms hereof. The Buyer may, at any time upon ten
Business Days prior written notice, designate as Servicer any Person to succeed
the Seller on the condition any such Person so designated shall agree to perform
the duties and obligations of the Servicer pursuant to the terms hereof and
shall be acceptable to the Collateral Agent; PROVIDED that the Buyer's right to
so designate a successor Servicer at any time is personal to the Buyer and may
not be assigned to any other Person (including the Collateral Agent). The
Collateral Agent may at any time from and after a Servicing Termination Event
designate as Servicer any other Person to succeed the Seller or any Successor
Servicer, on the condition in each case that any such Person so designated shall
agree to perform the duties and obligations of the Servicer pursuant to the
terms hereof. The Servicer may, with the prior written consent of the Buyer and
the Collateral Agent, subcontract with any other Person for servicing,
administering or collecting the Transferred Assets, provided that the Servicer
shall remain liable for the performance of the duties and obligations of the
Servicer pursuant to the terms hereof. The Servicer shall use reasonable care
in performing its duties as Servicer hereunder and, without limiting the
foregoing, shall service the Transferred Assets in accordance with the Credit
and Collection Policy. The Servicer acknowledges that the Buyer has, pursuant
to the Credit Agreement, granted to the Collateral Agent, for the benefit of
Triple-A and the Surety, a security interest in all of the Transferred Assets
and has assigned to the Collateral Agent all of its rights under this Agreement,
including its rights with respect to the Servicer under this ARTICLE VI, as more
fully described in SECTION 9.04 hereunder.
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SECTION 6.02. DUTIES OF THE SERVICER. (a) The Servicer shall take
or cause to be taken all such actions as may be necessary or advisable to
collect each Transferred Asset from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy. The Buyer hereby appoints
as its agent the Servicer, from time to time designated pursuant to
SECTION 6.01, to enforce its respective rights and interests in and under the
Receivables, the Related Security, the related Contracts and the other
Transferred Assets. The Servicer will at all times apply the same standards and
follow the same procedures with respect to the decision to commence, and in
prosecuting and litigating with respect to Receivables as it applies and follows
with respect to accounts, chattel paper and instruments which are not
Transferred Assets. In no event shall the Servicer be entitled to make the
Collateral Agent or the Buyer a party to any litigation without the Buyer's and
the Collateral Agent's express prior written consent. The Servicer shall
segregate and set aside for the account of the Buyer all Collections of
Transferred Assets in accordance with SECTION 2.05 hereof and SECTION 6.06 of
the Credit Agreement and shall cause all such Collections to be remitted to a
Lock-Box Account and/or deposited directly into the Collection Account within
one Business Day after identification thereof by the Servicer and in any event
within four Business Days after the Servicer's receipt thereof. The Servicer
shall promptly review all checks and other instruments returned to it by the
Lock-Box Bank on account of restrictive endorsements, improper payees, incorrect
amounts or for any other reason and shall not deposit any such checks or
instruments in its own accounts unless it is determined to the Buyer's
satisfaction that such amounts do not constitute Collections; any such checks or
instruments which are determined to be Collections shall be promptly remitted to
the Lock-Box Account or the Collection Account as provided above. Provided that
the Termination Date shall not have occurred, the Seller, while it is Servicer,
may, in accordance with the Credit and Collection Policy, (i) amend, modify or
waive any term or condition of any Contract to reflect any Permitted Extension,
(ii) adjust the Outstanding Balance of any Transferred Asset to reflect the
reductions, adjustments or cancellations described in the first sentence of
SECTION 2.05 of the Purchase Agreement, (iii) so long as such prepayment would
not cause an Event of Termination under SECTION 7.01(m) hereof and subject to
the
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payment of the Termination Amount, consent to the prepayment or early
termination of a Contract, and (iv) amend, modify or waive any provision of a
Delinquent Receivable or Defaulted Receivable so as to maximize the
collectibility thereof. The Seller shall deliver to the Servicer, and the
Servicer shall hold in trust for the Seller and the Buyer in accordance with
their respective interests, all Records. Notwithstanding anything to the
contrary contained herein, following the occurrence of an Event of Termination,
the Collateral Agent shall have the absolute and unlimited right to direct the
Servicer (whether the Servicer is the Seller or otherwise) to commence or settle
any legal action to enforce collection of any Receivable or other Transferred
Asset or to foreclose upon or repossess any Related Security.
(b) The Servicer shall as soon as practicable following receipt turn
over to the Seller the collections of any receivable which is not a Transferred
Asset less, in the event the Seller is not the Servicer, all reasonable and
appropriate out-of-pocket costs and expenses of such Servicer of servicing,
collecting and administering such receivable.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the Servicer, if the Collateral Agent or its designee, shall have no
obligation to collect, enforce or take any other action described in this
ARTICLE VI with respect to any receivable that is not a Transferred Asset other
than to deliver to the Seller the Collections and documents with respect to any
such receivable as described in the first two sentences of SECTION 6.02(b) and
to exercise the same degree of care with respect to Collections and documents in
its possession as it would exercise with respect to its own property.
(d) The Servicer will, at the Servicer's cost and expense and as agent
in the name of and on behalf of the Buyer, but subject at any time to the right
of the Buyer to direct and control, endeavor to collect, as and when the same
becomes due, all amounts owing on each Receivable. In the event of default by
an Obligor under any Receivable, the Servicer shall have the power and
authority, on behalf of the Buyer, to take such action in respect of the
enforcement and collection of such Receivable as the Servicer, in the absence of
contrary instructions from the Buyer, may deem advisable. In any such suit for
enforcement or collection, the Servicer shall be entitled to sue thereon in its
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own name or as agent for the Buyer, in either case, for the account of the
Buyer.
(e) In the event the Servicer accepts in payment of any Receivable the
taking of repossession of the Equipment the sale or lease of which gave rise to
such Receivable, the Servicer agrees to use its reasonable efforts to resell or
re-lease such Equipment for the account of the Buyer and shall remit to the
Buyer the gross sale proceeds thereof or, to the extent such Equipment is re-
leased, shall deliver to the Buyer the chattel paper or other documents
evidencing the rights to payment arising from such re-lease, all of which
documents shall constitute Contracts and which rights to payment shall
constitute Receivables, and all of which Contracts and Receivables shall
constitute part of the Transferred Assets. Neither the Buyer nor the Collateral
Agent shall have any obligation to take any action or commence any proceedings
to realize upon any Receivable or to enforce any of its rights or remedies with
respect thereto. Any moneys collected by the Servicer pursuant to this
SUBSECTION 6.02(e) shall be segregated by the Servicer, held in trust by the
Servicer for the Buyer and shall be remitted to a Lock-Box Account or to the
Collection Account within one Business Day after identification thereof by the
Servicer and in any event within four Business Days after the Servicer's receipt
thereof.
(f) The Servicer shall maintain all books of account and other records
pertaining to the Receivables and the other Transferred Assets in such form as
will enable the Buyer or its designees to determine at any time the status
thereof. The Servicer will permit the Buyer, the Collateral Agent and any
Person designated by the Buyer or the Collateral Agent, during regular business
hours, to inspect, audit, check and make abstracts from all books, accounts,
records, or other papers pertaining to such Transferred Assets. From time to
time, at the request of the Buyer or the Collateral Agent, the Servicer, at its
own expense, will (i) deliver to the Buyer and the Collateral Agent and any
Person designated by the Buyer or the Collateral Agent any records and invoices
pertaining to the Transferred Assets and evidence thereof as the Buyer, the
Collateral Agent or such designee may deem necessary to enable it to enforce its
rights thereunder and (ii) mark each computer record relating to, and each
invoice or other evidence of, the Transferred Assets (whether or not such
computer record or other item is the
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property of the Buyer) as the Buyer or Collateral Agent may direct to reflect
the interests of the Buyer and the Collateral Agent in such Transferred Assets.
The Servicer will either (i) segregate, from all the documents relating to other
receivables then owned or being serviced by the Servicer, all documents relating
to the Transferred Assets or (ii) mark all such documents relating to the
Transferred Assets so as to make such documents readily identifiable as property
of the Buyer and with such legend as shall be specified by the Collateral Agent,
and will, in either such event, hold all such documents in trust for the Buyer
and safely keep such documents in filing cabinets or other suitable containers
marked to show the Buyer's interest.
SECTION 6.03. RIGHTS OF THE BUYER. At any time:
(a) The Buyer may notify the Obligors of the Receivables, or any
of them, of the Buyer's ownership interest in Transferred Assets and
direct such Obligors, or any of them, that payment of all amounts
payable under any Receivable be made directly to the Buyer or its
designee (including, without limitation, the Collateral Agent).
(b) The Seller shall, at the Collateral Agent's or Buyer's
request and at the Seller's expense, give notice of the Buyer's
interest in the Transferred Assets to each Obligor (in substantially
the form of the Notice of Assignment) and direct that payments be made
directly to the Buyer or its designee (including, without limitation,
the Collateral Agent).
(c) The Seller shall, at the Buyer's request, assemble all
Records which the Buyer reasonably believes are necessary or
appropriate for the administration and enforcement of the Transferred
Assets, and shall make the same available to the Buyer at a place
selected by the Buyer or its designee.
(d) The Seller hereby authorizes the Buyer and the Collateral
Agent to take any and all steps in the Seller's name and on behalf of
the Seller necessary or desirable, in the determination of the Buyer
and/or the Collateral Agent, to collect all amounts due under any
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and all Transferred Assets or related Receivables, including, without
limitation, endorsing the Seller's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
Contracts.
SECTION 6.04. FURTHER ACTION EVIDENCING TRANSFERS. The Seller agrees
that from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the Buyer
may reasonably request in order to perfect, protect or more fully evidence the
Buyer's interest in the Transferred Assets, or to enable the Buyer to exercise
or enforce any of its rights hereunder or under any related document. Without
limiting the generality of the foregoing, the Seller will mark its master data
processing records evidencing such Transferred Assets with a legend, acceptable
to the Buyer, evidencing that the Buyer has acquired an ownership interest
therein as provided in this Agreement and, upon the request of the Buyer,
will execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate or as the Buyer may reasonably request. The Seller
hereby authorizes the Buyer to file one or more financing or continuation
statements, and amendments thereto and assignments thereof, relative to all or
any of the Transferred Assets now existing or hereafter arising without the
signature of the Seller where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Transferred Assets, or any part thereof, shall be sufficient as a financing
statement. If the Seller fails to perform any of its agreements or obligations
under this Agreement, the Buyer may (but shall not be required to) itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Buyer incurred in connection therewith shall be payable by the Seller
upon the Buyer's demand therefor; PROVIDED, HOWEVER, prior to taking any such
action, the Buyer shall give notice of such intention to the Seller and provide
the Seller with a reasonable opportunity to take such action itself.
SECTION 6.05. RESPONSIBILITIES OF THE SELLER. Anything herein to the
contrary notwithstanding, the Seller shall (i) perform all of its obligations
under the Contracts to the
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same extent as if such Contracts had not been transferred to the Buyer under the
Purchase Agreement and the exercise by the Buyer or its assigns of their
respective rights hereunder shall not relieve Seller from such obligations and
(ii) pay when due any taxes, including without limitation, sales, excise and
personal property taxes payable in connection with the Transferred Assets,
unless the Seller is contesting the payment of such taxes in good faith and by
appropriate proceedings and with respect to which no Adverse Claim has been
asserted or filed.
SECTION 6.06. ADMINISTRATION OF COLLECTIONS BY SERVICER. (a) The
Servicer shall identify on a timely basis all collections which are on account
of the Transferred Assets. including all deposits to Lock Box Accounts. On each
Business Day, all Collections received in the Lock Box Accounts for the prior
Business Day (and such Business Day, if practicable) shall be transferred to the
Collection Account. If the Servicer receives any cash or checks, drafts, wire
transfers or other instruments for the payment of money on account or otherwise
in respect of the Transferred Assets, the Servicer shall segregate such cash and
other items, hold such cash and other items in trust for the benefit of the
Buyer and the Collateral Agent and shall cause such cash and other items
(properly endorsed, where required, so that such items may be collected by the
Buyer) to be deposited in a Lock Box Account or directly in the Collection
Account immediately after the date any such cash or other item shall have been
identified as being on account of a Transferred Asset.
SECTION 6.07. APPLICATION OF COLLECTIONS. All Collections on account
of the Receivables of each Obligor shall be applied in the order of maturity
thereof unless specifically identified otherwise in writing by such Obligor or
directed by a court of competent jurisdiction. Any payment by an Obligor in
respect of any indebtedness or other obligations owed by such Obligor to the
Seller or the Servicer shall, except as otherwise specified by such Obligor or
otherwise required by law, be applied as a Collection of a Receivable of such
Obligor (in the order of the age by invoice date of such Receivables, starting
with the oldest such Receivable) to the extent of any amounts then due and
payable thereunder before being applied to any other indebtedness of such
Obligor to the Seller or the Servicer. The Servicer shall not influence or
instruct any Obligor who is
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indebted to the Seller in respect of any indebtedness not included in the
Transferred Assets to direct that its remittances be applied to any such
indebtedness prior to being applied to the Transferred Assets.
SECTION 6.08. SERVICING FEE. On each Settlement Date, as full
compensation for its servicing activities hereunder, the Servicer shall be
entitled to receive a fee (the "SERVICING FEE") in an amount equal to 1.15%
TIMES the Outstanding Balance of the Receivables as of the last day of the prior
calendar month TIMES a fraction, the numerator of which is the number of actual
days elapsed in such calendar month and the denominator of which equals 360. In
the event that the Buyer (or the Collateral Agent) appoints a successor
Servicer, the Servicing Fee may be adjusted as required by such successor
Servicer and as agreed to by the Buyer and the Collateral Agent.
SECTION 6.09. RESIGNATION; SUCCESSOR SERVICER. (a) The obligation of
the Servicer to service the Receivables is personal to the Servicer and the
parties recognize that another Person may not be qualified to perform such
obligations. Accordingly, the Servicer's obligation to service the Transferred
Assets hereunder shall be specifically enforceable and shall be absolute and
unconditional in all circumstances, including, without limitation, after the
occurrence and during the continuation of any Event of Termination or Servicing
Termination Event hereunder; PROVIDED, HOWEVER, that a Successor Servicer may be
appointed pursuant to this SECTION 6.09.
(b) Notwithstanding the foregoing, the Servicer may resign from the
obligations and duties hereby imposed on it as Servicer upon determination that
(i) the performance of its duties hereunder is no longer permissible under any
applicable law and (ii) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder permissible under any such
applicable law. Any determination permitting the resignation of the Servicer
shall be evidenced as to clause (i) above by an opinion of counsel to such
effect delivered to the Buyer and the Collateral Agent. Except to the extent
inconsistent with any such applicable law, no such resignation shall become
effective until a Successor Servicer shall have assumed the responsibilities and
obligations of the
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Servicer in accordance with the remaining provisions of this SECTION 6.09.
(c) The Collateral Agent shall, as promptly as possible after the
Servicer has given notice pursuant to SECTION 6.09(b) above or at any time after
the Buyer's or the Collateral Agent's designation of a successor Servicer
pursuant to SECTION 6.01, appoint a successor servicer (the "SUCCESSOR
SERVICER") and such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Collateral Agent. Upon its appointment,
the Successor Servicer shall be the successor in all respects to the Servicer
with respect to servicing functions under this Agreement and the Credit
Agreement shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof and
thereof, and all references in this Agreement or any other Facility Documents to
the Servicer shall be deemed to refer to the Successor Servicer. The Servicer
agrees to cooperate with the Successor Servicer in effecting the transfer of its
responsibilities, duties, liabilities and rights hereunder, including, without
limitation, the execution and delivery of assignments of financing statements,
the transfer to the Successor Servicer of all cash amounts held by the Servicer
or thereafter received with respect to the Transferred Assets, the transfer of
electronic records relating to the Transferred Assets in such form as the
Successor Servicer may reasonably request and the transfer of all related
Records, correspondence and other documents relating to the Transferred Assets.
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ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. EVENTS OF TERMINATION. If any of the following events
("Events of Termination") shall occur:
(a) (i) The Servicer (if the Seller or any Affiliate of the Seller)
shall fail to perform or observe any term, covenant or agreement hereunder
(other than as referred to in clause (ii) of this SECTION 7.01(a)) and such
failure shall remain unremedied for three Business Days after written notice
from the Buyer or (ii) either the Servicer (if the Seller or any Affiliate of
the Seller) or the Seller shall fail to make any payment or deposit to be made
by it hereunder when due and with respect to such payments which do not relate
to the remittance of Collections, such failure shall remain unremedied for three
Business Days after written notice from the Buyer; or
(b) The Seller shall fail to perform or observe any term, covenant or
agreement contained in ARTICLE VI and any such failure shall remain unremedied
for five Business Days after written notice from the Buyer; or
(c) Any representation or warranty made or deemed to be made by the
Seller (or any of its officers) under or in connection with this Agreement, any
Settlement Report or other information or report delivered pursuant hereto shall
prove to have been false or incorrect in any material respect when made;
PROVIDED, HOWEVER, that (i) to the extent any breach of any such representation
or warranty may be cured within ten Business Days, the Seller shall have ten
Business Days after learning of such breach to make such representation and
warranty true and correct and (ii) if any such false or incorrect representation
or warranty has given rise to a deemed collection as provided under SECTION
2.05, then, upon the Seller's payment of such deemed Collection at the time and
in the manner required under this Agreement, the breach of such representation
or warranty shall not give rise to an Event of Termination under this subsection
(c); or
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(d) The Seller shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and any such failure shall remain unremedied for ten Business Days
after written notice from the Buyer (it being understood that, if any such
failure gives rise to a deemed Collection as provided under SECTION 2.05, then
the payment of such deemed Collection at the time and in the manner required
under this Agreement shall be deemed a remedy of such failure); or
(e) The Seller shall fail to pay any principal of or premium or
interest on any Indebtedness when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness; or any other
default under any agreement or instrument relating to any such Indebtedness of
the Seller or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable or required to be prepaid (other than by
a regularly scheduled required prepayment) prior to the stated maturity thereof;
or
(f) Any Purchase or acquisition by the Buyer of Transferred Assets
shall for any reason, except to the extent permitted by the terms hereof, cease
to create a valid and perfected first priority interest in each Receivable, the
Related Security and the Equipment and Collections with respect thereto;
PROVIDED, HOWEVER, if any such failure results in a deemed Collection under
SECTION 2.05 hereof and the Seller satisfies in full its payment obligations
under such section, then such failure shall not give rise to an Event of
Termination under this subsection (f); or
(g) (i) An Insolvency Event shall occur with respect to the Seller or
the Buyer or (ii) the Seller or the Buyer shall take any corporate action to
authorize the filing of any Insolvency Proceeding; or
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(h) There shall have been any material adverse change in the
financial condition or operations of the Seller since December 31, 1993 (except
as disclosed in the Interim Financials described in SECTION 4.01(e)), or there
shall have occurred any event which materially adversely affects the
collectibility of the Receivables generally or there shall have occurred any
other event which materially adversely affects the ability of the Seller to
collect Receivables generally or the ability of the Seller to perform hereunder;
or
(i) The Seller shall fail to observe any covenant contained in
SECTION 5.04; or
(j) As of the last day of any month, the Default Ratio shall be
greater than 3.5%; or
(k) As of the last day of any month, the Delinquency Ratio shall be
greater than 5.5%; or
(l) As of the last day of any month, the average annualized monthly
prepayment rate (i.e., prepayments as a percentage of gross Receivables
balances) of all Receivables which have been prepaid for the twelve-month period
then ended shall exceed 7%; or
(m) Any "Wind-Down Event" shall occur under the Credit Agreement;
then, and in any such event, the Buyer may by notice to the Seller declare the
Termination Date to have occurred, EXCEPT that, in the case of any event
described in clause (i) of subsection (g) above, the Termination Date shall be
deemed to have occurred automatically upon the occurrence of such event. Upon
any such declaration or automatic occurrence, the Buyer shall have, in addition
to all other rights and remedies under this Agreement or otherwise, all other
rights and remedies provided under the UCC of the applicable jurisdiction and
other applicable laws, which rights shall be cumulative.
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. INDEMNITIES BY THE SELLER. (a) Without limiting any
other rights which the Buyer may have hereunder or under applicable law, the
Seller hereby agrees to indemnify the Buyer and its permitted successors and
assigns (including, without limitation, Triple-A, the Collateral Agent and the
Surety) and their respective officers, directors, agents and employees (each, an
"INDEMNIFIED PARTY"), from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements (all of the foregoing being collectively referred to as
"INDEMNIFIED AMOUNTS") awarded against or incurred by any Indemnified Party
relating to or resulting from any of the following (excluding, however, (i)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of an Indemnified Party or (ii) recourse (except with
respect to payment and performance obligations provided for in this Agreement)
for uncollectible Receivables):
(i) the transfer of any Receivable which was not, as of the date
of Purchase, an Eligible Receivable;
(ii) any representation or warranty made or deemed made by the
Seller (or any of its officers) under or in connection with this
Agreement, any Settlement Report or any other information or report
delivered by the Seller pursuant hereto, which shall have been false
or incorrect in any material respect when made or deemed made or
delivered;
(iii) the failure by the Seller (individually or as Servicer) to
comply with any term, provision or covenant contained in this
Agreement (other than any covenant contained in SECTION 5.04, a breach
of which shall constitute an Event of Termination but shall not give
rise to indemnification under this SECTION 8.01), or any agreement
executed in connection with this Agreement or with any applicable law,
rule or regulation with respect to any Receivable, the related
Contract, the Related Security or the other Transferred
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Assets, or the nonconformity of any Receivable, the related Contract, the
Related Security or the other Transferred Assets with any such applicable
law, rule or regulation;
(iv) the failure to vest and maintain vested in the Buyer or to
transfer to the Buyer an interest in the Transferred Assets, free and
clear of any Adverse Claim (including, without limitation, free and
clear of any Permitted Lien except in favor of the Buyer or its
assignees) whether existing at the time of the Purchase of such
Receivable or at any time thereafter;
(v) the failure to file, or any delay in filing (other than
solely as a result of the action or inaction of the Buyer), financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws against the
Seller with respect to any Contract or Receivables which are, or are
purported to be, Transferred Assets, whether at the time of any
Purchase or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale
or lease of the Equipment and/or services related thereto or the
furnishing or failure to furnish such Equipment and/or services;
(vii) any failure of the Seller, as Servicer or otherwise, to
perform its duties or obligations in accordance with the provisions of
Article VI;
(viii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with the Equipment or
any other goods,
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merchandise and/or services which are the subject of any Receivable or
Contract;
(ix) the failure to pay when due any taxes, including, without
limitation, sales, excise or personal property taxes payable in
connection with the Transferred Assets;
(x) the termination, rejection or non-assumption by the Seller of any
Contract prior to the original term of such Contract, whether such
rejection, early termination or non-assumption is made pursuant to an
equitable cause, statute, regulation, judicial proceeding or other
applicable laws (including, without limitation, Section 365 of the
Bankruptcy Code);
(xi) the failure of the Seller and the Obligors under the Contracts
to maintain casualty and liability insurance for the Equipment related to
the Receivables in an amount at least equal to the Discounted Receivables
Balance;
(xii) the failure of any Lock-Box Bank to remit any funds in the Lock-
Box Accounts as required hereunder; and
(xiii) the commingling of Collections of any Transferred Assets with
any other funds of the Seller.
Any amounts subject to the indemnification provisions of this SECTION 8.01 shall
be paid by the Seller to the applicable Indemnified Party within two Business
Days following the Indemnified Party's demand therefor.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Agreement nor consent to any departure by the Seller, shall in
any event be effective unless the same shall be in writing and signed by (i) the
Seller and the Buyer (with respect to an amendment) or (ii) the Buyer (with
respect to a waiver or consent by it) or the Seller (with respect to a waiver or
consent by it), as the case may be, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. This Agreement contains a final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire agreement (together with the exhibits hereto) among
the parties hereto with respect to the subject matter hereof, superseding all
prior oral or written understandings.
SECTION 9.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, upon receipt,
or in the case of delivery by mail, five days after being deposited in the
mails, or, in the case of notice by telex, when telexed against receipt of
answer back, or in the case of notice by facsimile copy, when verbal
communication of receipt is obtained, in each case addressed as aforesaid,
except that notices and communications pursuant to Article II shall not be
effective until received.
SECTION 9.03. NO WAIVER; REMEDIES. No failure on the part of the
Buyer to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
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SECTION 9.04. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the Seller, the Buyer and their
respective successors and permitted assigns (which successors of the Seller
shall include a trustee in bankruptcy). The Seller may not assign any of its
rights and obligations hereunder or any interest herein without the prior
written consent of the Buyer and the Collateral Agent. The Buyer may assign at
any time its rights and obligations hereunder and interests herein to any other
Person without the consent of the Seller. Without limiting the foregoing, the
Seller acknowledges that the Buyer shall assign to the Collateral Agent, for the
benefit of Triple-A and the Surety, as collateral security for its obligations
under the Credit Agreement, all of its rights, remedies, powers and privileges
hereunder and that Triple-A and/or the Collateral Agent may further assign such
rights, remedies, powers and privileges to the extent permitted in the Credit
Agreement. The Seller agrees that the Collateral Agent, as the assignee of the
Buyer, shall, subject to the terms of the Credit Agreement, have the right to
enforce this Agreement and to exercise directly all of the Buyer's rights and
remedies under this Agreement (including, without limitation, the rights and
remedies under SECTIONS 6.01, 6.02, 6.03, 6.04, and 8.01 and the Seller agrees
to cooperate fully with the Collateral Agent in the exercise of such rights and
remedies. Without limiting the foregoing, the Seller hereby acknowledges that
the Buyer and Triple-A have agreed pursuant to the Credit Agreement and certain
related agreements that, subject to the restrictions set forth therein, the
Collateral Agent, certain parties providing credit enhancements and/or liquidity
for Triple-A in connection with the Credit Agreement shall be entitled to
exercise the Buyer's rights under this Agreement. The Seller hereby consents to
the foregoing and agrees to cooperate with any such Person electing to exercise
the Buyer's rights under this Agreement. This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such time, after the
Termination Date, as the Collection Date shall occur; PROVIDED, HOWEVER, that
the rights and remedies with respect to any breach of any representation and
warranty made by the Seller pursuant to ARTICLE IV and the indemnification and
payment provisions of ARTICLE VIII and ARTICLE X shall be continuing and shall
survive any termination of this Agreement.
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SECTION 9.05. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS
OF THE BUYER IN THE TRANSFERRED ASSETS OR REMEDIES HEREUNDER OR THEREUNDER, IN
RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE
OF NEW YORK. THE SELLER HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT
LOCATED WITHIN THE STATE OF NEW YORK, AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO THE SELLER AT THE ADDRESS SET FORTH ON THE SIGNATURE
PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID, OR,
AT THE BUYER'S OPTION, BY SERVICE UPON CT CORPORATION SYSTEM, 1633 BROADWAY, NEW
YORK, NEW YORK 10019, WHICH THE SELLER HEREBY IRREVOCABLY APPOINTS AS ITS AGENT
FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS. THE SELLER HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE SELLER AND THE BUYER ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE FOREGOING CONSENT
TO JURISDICTION, THE SELLER HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 9.05 SHALL AFFECT THE RIGHT
OF THE BUYER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE BUYER TO BRING ANY ACTION OR PROCEEDING AGAINST THE
SELLER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 9.06. COSTS, EXPENSES AND TAXES. (a) In addition to the
rights of indemnification under ARTICLE VIII hereof, the Seller agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic auditing and any
requested amendments, waivers or consents) of this Agreement and the other
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of
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counsel for the Buyer (and the Collateral Agent) with respect thereto and with
respect to advising the Buyer (and the Collateral Agent) as to its rights and
remedies under this Agreement, and the other agreements executed pursuant hereto
and all costs and expenses, if any (including reasonable counsel fees and
expenses), in connection with the enforcement of this Agreement and the other
agreements and documents to be delivered hereunder.
(b) In addition, the Seller shall pay any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other agreements and documents to be delivered hereunder, and agrees to
indemnify the Buyer and its assignees against any liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 9.07. EXECUTION IN COUNTERPARTS; SEVERABILITY. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same agreement. In case any provision in or obligation under this Agreement
or the Certificate shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER/SERVICER: HPSC, INC.
By: Rene LeFebvre
-------------------------------
Name: Rene LeFebvre
Title: Vice President and
Chief Financial Officer
By: John Everets, Jr.
-------------------------------
Name: John Everets, Jr.
Title: Chairman and Chief
Executive Officer
Address: Sixty State Street
35th Floor
Boston, MA 02109-1803
Attn: Vice President,
Finance
BUYER: HPSC BRAVO FUNDING CORP.
By: John Everets, Jr.
-------------------------------
Name: John Everets, Jr.
Title: President
Address: Sixty State Street
35th Floor
Boston, MA 02109-1803
Attn: President,
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EXHIBIT 10.32
CREDIT AGREEMENT
Dated as of January 31, 1995
among
HPSC BRAVO FUNDING CORP.
TRIPLE-A ONE FUNDING CORPORATION
and
CAPITAL MARKETS ASSURANCE CORPORATION
as Administrative Agent and Collateral Agent
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Definitions. . . . . . . . . . . . . . . 2
SECTION 1.02. Accounting Terms . . . . . . . . . . . . . . . . 2
SECTION 1.03. Other Terms. . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Computation of Time Periods. . . . . . . . . . . 2
ARTICLE II
THE TRIPLE-A LOANS
SECTION 2.01. The Triple-A Loans . . . . . . . . . . . . . . . 2
SECTION 2.02. Note.. . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.03. Making the Triple-A Loans. . . . . . . . . . . . 3
SECTION 2.04. Reduction of Facility Limit. . . . . . . . . . . 5
SECTION 2.05. Repayments; Manner of Payment and
Prepayment . . . . . . . . . . . . . . . . . . . 5
SECTION 2.06. Interest on Triple-A Loans; Default
Interest . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.07. Voluntary and Mandatory Prepayment of
Triple-A Loans . . . . . . . . . . . . . . . . . 6
SECTION 2.08. Compensation . . . . . . . . . . . . . . . . . . 7
SECTION 2.09. Increased Costs, Capital Adequacy. . . . . . . . 7
SECTION 2.10. Taxes. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.11. Fees . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Borrowing. . . . 10
SECTION 3.02. Conditions Precedent to Each Borrowing . . . . . 11
ARTICLE IV
i
<PAGE>
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Borrower . . . . . . . . . . . . . . . . . . . . 12
ii
<PAGE>
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. Affirmative Covenants of the Borrower. . . . . . 18
SECTION 5.02. Reporting Requirements of the Borrower . . . . . 23
SECTION 5.03. Negative Covenants of the Borrower . . . . . . . 24
ARTICLE VI
SECURITY INTEREST
SECTION 6.01. Grant of Security Interests. . . . . . . . . . . 28
SECTION 6.02. Continuing Liability of the Borrower . . . . . . 29
SECTION 6.03. Filings; Further Assurances. . . . . . . . . . . 30
SECTION 6.04. Place of Business; Change of Name. . . . . . . . 30
SECTION 6.05. Lock-Box Accounts; Collection Account. . . . . . 31
SECTION 6.06. Collection Account.. . . . . . . . . . . . . . . 31
ARTICLE VII
WIND-DOWN EVENTS; REMEDIES
SECTION 7.01. Wind-Down Events . . . . . . . . . . . . . . . . 34
SECTION 7.02. Remedies . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. . . . . . . . . . . . . . . . . 37
SECTION 8.02. Notices, Etc.. . . . . . . . . . . . . . . . . . 37
SECTION 8.03. No Waiver; Remedies. . . . . . . . . . . . . . . 37
SECTION 8.04. Binding Effect; Assignability. . . . . . . . . . 37
SECTION 8.05. GOVERNING LAW; WAIVER OF JURY TRIAL. . . . . . . 38
SECTION 8.06. Costs, Expenses and Taxes. . . . . . . . . . . . 39
SECTION 8.07. Execution in Counterparts; Severability. . . . . 39
SECTION 8.08. No Bankruptcy Petition Against Triple-A. . . . . 39
iii
<PAGE>
LIST OF EXHIBITS
EXHIBIT A Form of Triple-A Note
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C Form of Opinion of Counsel
EXHIBIT D Form of Officer's Certificate
EXHIBIT E List of Offices of Seller where Records Are Kept
EXHIBIT F Form of Interest Rate Hedge Assignment
iv
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of January 31, 1995 (the "CREDIT
AGREEMENT"), among HPSC BRAVO FUNDING CORP., a Delaware corporation
("BORROWER"), TRIPLE-A ONE FUNDING CORPORATION, a Delaware corporation ("TRIPLE-
A") and CAPITAL MARKETS ASSURANCE CORPORATION, a New York stock insurance
company ("CAPMAC"), as Collateral Agent and as Administrative Agent (in such
capacities, the "COLLATERAL AGENT" or the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement, the Borrower has agreed
to purchase and otherwise acquire certain Transferred Assets from time to time
from HPSC, Inc., a Delaware corporation (the "SELLER") and the Seller has agreed
to act as Servicer of the Transferred Assets; and
WHEREAS, the Borrower has requested that Triple-A make the Triple-A
Loans to the Borrower, the proceeds of which shall be used to purchase
Transferred Assets from the Seller in accordance with the terms of the Purchase
Agreement; and
WHEREAS, Triple-A will fund such loans by (i) the issuance of
Commercial Paper or (ii) if Triple-A is unable for any reason to issue
Commercial Paper, by borrowing under the Liquidity Agreement, dated as of the
date hereof, among Triple-A, the Banks and the Bank Agent; and
WHEREAS, as a condition precedent to the foregoing Triple-A Loans, the
Borrower has agreed to grant a security interest in favor of the Collateral
Agent, for the benefit of Triple-A, in all of its right, title and interest in,
to and under the Transferred Assets, the Purchase Agreement and the other
Collateral as described herein; and
WHEREAS, Capital Markets Assurance Corporation (the "SURETY"), the
Borrower and Triple-A will enter into the Insurance and Indemnity Agreement
pursuant to which the Surety will issue the Surety Bonds to guarantee repayment
of the Triple-A Loans; and
<PAGE>
WHEREAS, subject to the terms and conditions set forth herein, Triple-
A is willing to make the Triple-A Loans to the Borrower.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 CERTAIN DEFINITIONS. As used in this Credit Agreement,
the Triple-A Note or any certificate or other document made or delivered
pursuant hereto or thereto, the capitalized terms used herein and therein shall,
unless otherwise defined herein or therein, have the meanings assigned to them
in the Definitions List attached hereto as Appendix A, the terms of which are
incorporated herein by reference (the "DEFINITIONS LIST").
SECTION 1.02. ACCOUNTING TERMS. As used herein, in the Triple-A Note
and in any certificate or other document made or delivered pursuant hereto and
thereto, accounting terms not defined in the Definitions List and accounting
terms partly defined in the Definitions List to the extent not defined, shall
have the respective meanings given to them under GAAP.
SECTION 1.03. OTHER TERMS. (a) All other undefined terms contained
in this Credit Agreement shall, unless the context indicates otherwise, have the
meanings provided for by the UCC to the extent the same are used or defined
therein.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Credit Agreement shall refer to this Credit Agreement
as a whole and not to any particular provision of this Credit Agreement, and
Section, subsection, Schedule and Exhibit references are to this Credit
Agreement unless otherwise specified.
(c) Capitalized terms used herein and in the Triple-A Note shall be
equally applicable to both the singular and plural forms of such terms.
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SECTION 1.04. COMPUTATION OF TIME PERIODS. In this Credit Agreement,
in the computation of periods of time from a specified date to a later specified
date, the word "from" shall mean "from and including" and the words "to" and
"until" shall each mean "to but excluding."
ARTICLE II
THE TRIPLE-A LOANS
SECTION 2.01. THE TRIPLE-A LOANS. (a) Triple-A agrees that it may,
in its sole discretion and otherwise subject to the terms and conditions
hereinafter set forth, make loans ("TRIPLE-A LOANS"), as described below, on a
revolving basis to the Borrower from time to time on the Closing Date and on any
Settlement Date subsequent thereto during the period from the Closing Date to
the Termination Date in an aggregate principal amount not to exceed at any time
outstanding the least of (i) the Facility Limit, and (ii) the sum of (a) the net
proceeds from the sale of Commercial Paper on any Borrowing Date PLUS (b) the
proceeds of Advances on such Borrowing Date. Without limiting Triple-A's
discretion not to make or advance any Triple-A Loan, under no circumstances
shall Triple-A make any Triple-A Loan if, after giving effect thereto, the
aggregate outstanding principal amount of the Triple-A Loans would exceed (a)
the Facility Limit or (b) the Borrowing Base, whichever is less. The Borrowing
Base in effect on any date shall be determined by reference to the most recent
Settlement Report delivered by the Borrower to Triple-A in accordance with
SECTION 5.02(f) hereof (i) as adjusted on the most recent Settlement Date to
reflect additional Eligible Receivables sold on such Settlement Date since the
delivery of such Settlement Report and (ii) as adjusted on any other date of
determination to eliminate from the Discounted Eligible Receivables Balance any
Receivables which were Eligible Receivables as of the dates reflected in the
Settlement Report but which no longer satisfy the criteria for Eligible
Receivables. The Triple-A Loans shall mature on the date on which the principal
thereof has become due and payable pursuant to SECTION 7.02 hereof.
SECTION 2.02. NOTE. All of the Triple-A Loans shall be evidenced by
a promissory note in the form attached hereto as EXHIBIT A (the "TRIPLE-A NOTE")
appropriately completed, duly
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executed and delivered on behalf of the Borrower and payable to the order of
Triple-A. The Borrowing Date and principal amount of each Triple-A Loan, the
interest rate and Interest Period applicable thereto and each repayment or
prepayment of principal thereof shall be recorded in Triple-A's internal records
and, prior to any transfer of the Triple-A Note, on the grid schedule annexed
thereto, and the Borrower hereby authorizes Triple-A to make such recordation;
PROVIDED, HOWEVER, that the failure of Triple-A to set forth any or all of such
information on such schedule or any error in such schedule shall not in any
manner affect the obligation of the Borrower to repay the Triple-A Loans in
accordance with the terms hereof and of the Triple-A Note. Such updated grid
schedules, or other proper records maintained by Triple-A in lieu thereof, shall
be presumptively correct evidence of the Triple-A Loans made by Triple-A to the
Borrower. The aggregate outstanding principal amount of the Triple-A Loans at
any time shall be the aggregate principal amount owing on the Triple-A Note at
such time.
SECTION 2.03. MAKING THE TRIPLE-A LOANS.
(a) NOTICE OF BORROWING. Whenever the Borrower wishes to make a
Borrowing hereunder of Triple-A Loans, it shall deliver to Triple-A a notice
("NOTICE OF BORROWING") in substantially the form of EXHIBIT B hereto no later
than 10:00 A.M. (New York City time) on the Business Day immediately prior to
the proposed Borrowing Date; PROVIDED that, if the Borrower requests that the
Borrowing be funded with the proceeds of Eurodollar Rate Advances, such notice
shall be given not later than 10:00 A.M. (New York City time) at least three (3)
Business Days prior to the proposed Borrowing Date. Each Notice of Borrowing
shall be by telephone, telex, telecopy, cable or other facsimile transmission
(in the case of any such notice by telephone, confirmed immediately in writing)
and shall specify therein the proposed (1) Borrowing Date of such Borrowing,
which shall be a Settlement Date, (2) the aggregate amount of such Borrowing
requested (which amount shall be equal to $100,000 or an integral multiple
thereof and (3) the proposed Interest Period relating thereto and the proposed
principal amount of each Triple-A Loan to be allocated to each Interest Period.
Each Notice of Borrowing shall be irrevocable and binding on the Borrower.
(b) SELECTION OF INTEREST PERIODS. Promptly upon receiving each
Notice of Borrowing, the Administrative Agent
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shall, following its review of the Borrower's proposal, select the Interest
Periods for the Triple-A Loan thereby requested (it being understood that if the
Borrower does not propose a specific Interest Period, the Administrative Agent
shall select such Interest Period in its discretion). At least one Business Day
prior to the last day of each Interest Period for any Triple-A Loan, the
Borrower shall request new Interest Periods for all Triple-A Loans whose
Interest Periods are then ending and which are not to be prepaid as provided in
SECTION 2.07 below; PROVIDED that, in the case of any Interest Period for a
Triple-A Loan for which interest is requested to be determined by reference to
the Eurodollar Rate, such request shall be given not later than 10:00 A.M. (New
York City time) at least three (3) Business Days prior to the last day of the
relevant Interest Period. The Administrative Agent shall, on the date of any
Borrowing hereunder and, so long as such Triple-A Loan is outstanding, on the
first day of each successive Interest Period for such Triple-A Loan, notify the
Collateral Agent and the Borrower of the duration of the relevant Interest
Period and the interest rate which will be applicable to the Triple-A Loans
during such Interest Period as described in SECTION 2.06 below. Any Interest
Period that commences before the Termination Date and would otherwise end on a
date occurring after the Termination Date shall end on the Termination Date and
the duration of any Interest Period that commences on or after the Termination
Date shall be of such duration as shall be selected by the Administrative Agent.
In addition, if a CP Disruption shall have occurred and be continuing, Triple-A,
or the Administrative Agent on its behalf, may, upon notice to the Seller,
terminate any Interest Period then in effect if Triple-A has funded the Triple-A
Loan allocated to such Interest Period by issuing Commercial Paper. All
outstanding Triple-A Loans shall be assigned an Interest Period at all times
which Interest Periods will be limited as set forth in the definition thereof.
(c) FUNDING. Triple-A shall, before 3:00 P.M. (New York City time) on
the proposed Borrowing Date of each Borrowing, subject to the applicable
conditions set forth in ARTICLE IV, make available to the Borrower a wire
transfer of such funds to the Borrower in accordance with the Borrower's written
wire transfer instructions.
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SECTION 2.04. REDUCTION OF FACILITY LIMIT. The Borrower shall have
the right, at any time upon at least three (3) Business Days' notice to Triple-
A, to terminate in whole or reduce in part the unused portion of the Facility
Limit in a minimum amount of $10,000,000 and increments of $5,000,000 in excess
thereof; PROVIDED, that in no event shall the Facility limit be reduced to less
than the Triple-A Loans then outstanding. Any such termination shall be without
premium or penalty of any kind, except for any indemnification which may be owed
in connection with such termination pursuant to SECTION 2.08.
SECTION 2.05. REPAYMENTS; MANNER OF PAYMENT AND PREPAYMENT. The
Triple-A Loans shall be payable in full on the Scheduled Termination Date. Each
payment or prepayment of principal of and interest on the Triple-A Note and each
payment of fees, indemnities and all other amounts payable by the Borrower
hereunder shall be made by the Borrower in immediately available funds to
Triple-A not later than 1:00 P.M. (New York City time) on the date on which
payable. Payments received by Triple-A after such time shall be deemed to have
been received on the next Business Day. All payments by the Borrower under this
Credit Agreement and the Triple-A Note shall be made without setoff, deduction
or counterclaim and the Borrower agrees to pay on demand any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Triple-A
Note or from the execution, delivery or registration of, or otherwise with
respect to, this Credit Agreement or the Triple-A Note. Whenever any payment to
be made hereunder or under the Triple-A Note shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next
applicable Business Day and interest shall be payable at the applicable rate
during such extension; PROVIDED, that if such extension would cause payment of
interest on or principal of any Eurodollar Loan to be made in the next following
month, such payment shall be made on the next preceding Business Day.
SECTION 2.06. INTEREST ON TRIPLE-A LOANS; DEFAULT INTEREST.
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(a) The Borrower shall pay to Triple-A, as interest on the Triple-A
Loans outstanding, the following amounts on the following dates:
(i) on any Interest Payment Date for Triple-A Loans being funded
or maintained through the issuance of Commercial Paper, interest on
such Triple-A Loans in an amount equal to the imputed interest on such
maturing Commercial Paper plus the CP Dealer Fee on any such maturing
Commercial Paper;
(ii) on any Interest Payment Date for Triple-A Loans funded or
maintained through the making of Base Rate Advances under the
Liquidity Agreement, accrued and unpaid interest on such Triple-A
Loans at a per annum rate equal to the Base Rate, computed on the
basis of the actual number of days elapsed over a year of 365 or 366
days, as applicable; and
(iii) on any Interest Payment Date for Triple-A Loans funded or
maintained through the making of Eurodollar Rate Advances under the
Liquidity Agreement, accrued and unpaid interest on such Triple-A Loans at
a per annum rate equal to the Eurodollar Rate plus one-half of one percent
(.50%), computed on the basis of the actual number of days elapsed over a
year of 360 days.
(b) Following the occurrence and during the continuance of a Wind-
Down Event, and from and after the due date of any Triple-A Loan until such
Triple-A Loan is paid in full, the Borrower shall pay interest to Triple-A,
payable on demand, on the outstanding principal amount of each Triple-A Loan for
each day until paid in full at a per annum rate equal to two percent (2%) PLUS
the otherwise applicable rate for such Triple-A Loan for such day.
SECTION 2.07. VOLUNTARY AND MANDATORY PREPAYMENT OF TRIPLE-A LOANS.
(a) The Borrower shall have the right at any time and from time to time to
prepay any Triple-A Loans, in whole or in part, without premium or penalty, upon
at least three Business Days' written notice to the Administrative Agent, which
notice shall specify the proposed prepayment date and the amount of such
prepayment, PROVIDED that (i) any partial prepayment shall be equal to an
integral multiple of $1,000,000; and (ii)
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the Borrower shall, in connection with any such prepayment, indemnify Triple-A
and hold Triple-A harmless from any funding loss pursuant to the terms of
SECTION 2.08. If any such notice is given, the amount specified in such notice
shall be presumed correct absent manifest error and shall be due and payable on
the date specified therein. Each notice of prepayment shall be irrevocable and
binding on the Borrower.
(b) On each Settlement Date prior to the Termination Date, after
giving effect to any Purchases to be made on such date, the Borrower shall be
obligated to prepay the Triple-A Loans by an amount equal to the sum of (i) the
amount, if any, by which the outstanding principal amount of the Triple-A Loans
exceeds the Borrowing Base then in effect PLUS (ii) if any Purchase on or before
such Settlement Date consists of a capital contribution to which Triple-A shall
not have consented, an amount equal to the lesser of (A) the funds remaining on
deposit in the Collection Account after giving effect to the prepayment under
clause (i) above and (B) the amount, if any, by which the outstanding principal
amount of the Triple-A Loans would have exceeded the Borrowing Base had such
non-consensual Purchases not occurred.
(c) On each Business Day from and after the Termination Date, the
Borrower shall be obligated to repay the Triple-A Loans by an amount equal to
the amount, if any, by which (i) the funds on deposit in the Collection Account
on such day, exceeds (ii) the Carrying Costs then accrued and unpaid.
(d) In the event of any prepayment of a Triple-A Loan on any date
other than the last day of the Interest Period applicable thereto, the Borrower
shall indemnify Triple-A and hold Triple-A harmless from any funding loss (in an
amount equal to the amount of interest Triple-A would have received but for such
prepayment through the last day of the relevant Interest Period less the
interest earned on investing such funds) and expense which Triple-A may sustain
or incur as consequence of such prepayment in accordance with SECTION 2.08.
SECTION 2.08. COMPENSATION. The Borrower shall compensate Triple-A,
upon its written request, for all losses, expenses and liabilities, including,
without limitation, any indemnification payments owed by Triple-A pursuant to
the Liquidity Agreement, on account of any liquidation or
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reemployment of deposits or other funds acquired by such party to make, fund or
maintain a Triple-A Loan hereunder, (i) if for any reason the funding of any
Triple-A Loan does not occur on a date specified therefor in the Notice of
Borrowing; (ii) if for any reason any payment, prepayment or conversion of
principal of any Triple-A Loan occurs on a date which is not the last day of the
Interest Period for such Triple-A Loan or (iii) as a consequence of any required
prepayment of any Triple-A Loan or required conversion of any Eurodollar Rate
Advance prior to the last day of the Interest Period for the relevant Triple-A
Loan. Any request for compensation under this SECTION 2.08 shall be accompanied
by a copy of a statement from Triple-A setting forth in reasonable detail the
basis for requesting compensation and the determination of the amount thereof in
such statement shall be conclusive and binding for all purposes, absent manifest
error.
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SECTION 2.09. INCREASED COSTS, CAPITAL ADEQUACY.
(a) If, after the date hereof due to either (i) the introduction of
or any change in or to the interpretation of any law or regulation by the
governmental authority that promulgated or administers compliance with such law
or regulation (other than laws or regulations with respect to income taxes or
any change by way of imposition or increase of reserve requirements included in
the Eurodollar Reserve Percentage) or (ii) the compliance with any guideline or
request from any central bank or other governmental authority or similar agency
(whether or not having the force of law), and taking into account the
obligations of the Liquidity Banks under the Liquidity Agreement and otherwise
in connection with Triple-A's asset-supported financing business, any reserve or
deposit or similar requirement shall be imposed, modified or deemed applicable
or, any basis of taxation shall be changed or any other condition shall be
imposed, and there shall be any increase in the cost to Triple-A (either
directly or indirectly through any increase in the costs to the Liquidity Banks)
of making, funding, or maintaining Triple-A Loans or in the cost to Triple-A of
agreeing to make, fund, or maintain Triple-A Loans (including the reduction of
any sum received or Receivable hereunder), then the Borrower shall from time to
time, upon demand by Triple-A by the submission of the certificate described
below, pay to Triple-A additional amounts sufficient to compensate Triple-A for
such increased cost. A certificate setting forth in reasonable detail the
amount of such increased cost submitted to the Borrower by Triple-A shall be
conclusive and binding for all purposes, absent manifest error.
(b) If Triple-A or any Liquidity Bank determines that compliance with
any law or regulation or any guideline or request or any written interpretation
from any central bank or other governmental authority or similar agency (whether
or not having the force of law) which is introduced, implemented or received by
Triple-A or such Liquidity Bank after the date hereof, affects or would affect
capital adequacy or the amount of capital required or expected to be maintained
by Triple-A or such Liquidity Bank or any corporation controlling Triple-A or
such Liquidity Bank and that the amount of such capital is increased by or based
upon the Triple-A Loans or the existence of this Credit Agreement or upon the
Advances or such Liquidity Bank's commitment to lend under the Liquidity
Agreement and other commitments of that type, or has or would have the effect of
reducing the rate of return on
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capital, then, upon demand by Triple-A by the submission of the certificate
described below, the Borrower shall pay to Triple-A, from time to time as
specified by Triple-A, additional amounts sufficient to compensate Triple-A or
such corporation in the light of such circumstances, to the extent that Triple-A
reasonably determines such increase in capital to be allocable to the Triple-A
Loans or the existence of this Credit Agreement or to the extent that Triple-A
owes compensation to a Liquidity Bank in respect of or on account of such
events. A certificate setting forth in reasonable detail such amounts submitted
to the Borrower by Triple-A shall be conclusive and binding for all purposes,
absent manifest error.
SECTION 2.10. TAXES. (a) All payments made by the Borrower under
this Credit Agreement and the Triple-A Note shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
governmental authority having taxing authority, excluding net income taxes and
franchise taxes (imposed in lieu of income taxes) imposed on Triple-A, as a
result of any present or former connection between the jurisdiction of the
government or taxing authority imposing such tax or any political subdivision or
taxing authority thereof or therein and Triple-A (excluding a connection arising
solely from Triple-A having executed, delivered or performed its obligations or
received a payment under, or enforced, this Credit Agreement or the Triple-A
Note) (all such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called "TAXES"). If any Taxes are
required to be withheld from any amounts payable to or under the Triple-A Note,
(i) the sum payable shall be increased as may be necessary so that, after making
all required deductions (including deductions applicable to additional sums
payable under this SECTION 2.10), Triple-A receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower shall
make such deductions, and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges, or
similar levies that arise from any
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payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Credit Agreement (hereinafter "OTHER TAXES").
(c) The Borrower will indemnify Triple-A for the full amount of Taxes
or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this SECTION 2.10) paid by Triple-A
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto. Whenever any Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to Triple-A, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to Triple-A the required receipts or other
required documentary evidence, the Borrower shall indemnify Triple-A for any
incremental Taxes, interest or penalties that Triple-A is legally required to
pay as a result of any such failure. The agreements in this subsection shall
survive the termination of this Credit Agreement and the payment of the Triple-A
Note.
SECTION 2.11. FEES. In further consideration of the Triple-A Loans
to be made hereunder, the Borrower agrees to pay to the Administrative Agent and
Triple-A all fees specified in the Fee Letter of even date herewith, which fees
will be due and payable at the times and in the manner set forth in such Fee
Letter.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL BORROWING. The
agreement of Triple-A to make a Triple-A Loan on the occasion of the initial
Borrowing hereunder is subject to satisfaction of the following conditions
precedent:
(a) Triple-A shall have received, on or before the Closing Date, all of the
following, each fully executed and in form and substance satisfactory to Triple-
A:
(i) This Credit Agreement and the Triple-A Note;
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(ii) The Custodial Agreement and the Lock-Box Agreements;
(iii) A copy of the resolutions of the Board of Directors of the
Borrower approving the Purchase Agreement, this Credit Agreement, the
Triple-A Note, and all other documents and instruments to be delivered
hereunder or thereunder by the Borrower, certified by its Secretary or
Assistant Secretary;
(iv) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying (A) the names and true signatures of the officers of
the Borrower authorized to sign the Purchase Agreement, this Credit
Agreement, the Triple-A Note and the other documents and instruments to be
delivered by the Borrower pursuant hereto or thereto (on which certificate
Triple-A may conclusively rely until such time as Triple-A shall receive
from the Borrower a revised certificate meeting the requirements of this
subsection (iv)) and (B) a true and complete copy of the By-laws of the
Borrower;
(v) A certificate executed by an officer of the Borrower certifying
that as of the Closing Date, all of the representations and warranties
contained in ARTICLE IV hereof are true and accurate in all material
respects with the same force and effect as though such representations and
warranties had been made as of such time;
(vi) The Certificate of Incorporation of the Borrower, certified by
the Secretary of State of Delaware;
(vii) Good Standing Certificates for the Borrower issued by the
Secretaries of the States of Delaware and Massachusetts;
(viii) Certificates executed by an officer of the Borrower and the
Seller relating to solvency;
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(ix) An opinion of Hill & Barlow, counsel to the Borrower, in
substantially the form of EXHIBIT C and as to such other matters as Triple-
A may reasonably request;
(x) An opinion of Hill & Barlow, counsel to the Borrower, in form and
substance reasonably satisfactory to the Collateral Agent, that, in the
event of any Insolvency Proceeding filed by or against the Seller, the
Transferred Assets would not be treated as property of the Seller's estate
and that the Borrower's assets and liabilities would not be substantively
consolidated with those of the Seller;
(xi) Original copies of all documents described in SECTION 3.01 of
the Purchase Agreement and not otherwise described above;
(xii) An Officer's Certificate in the form of EXHIBIT D, executed by
the President or the Treasurer of the Borrower;
(xiii) The Fee Letter;
(xiv) The Insurance Agreement;
(xv) The Surety Bonds; and
(xvi) The Liquidity Agreement.
(b) All fees and expenses due and owing as of the Closing Date under the
Fee Letter shall have been paid;
(c) Either (i) the Administrative Agent shall have received confirmation
from Standard & Poor's Corporation and Moody's Investors Services, Inc. that the
terms and conditions of the Triple-A Loans satisfy the criteria of such rating
agencies for "investment-grade" transactions without giving effect to the Surety
Bonds or (ii) the Seller and the Borrower shall have agreed by separate written
commitments to make any changes to the Facility Documents which such agencies
may require in order to make the transactions evidenced hereby satisfy such
criteria PROVIDED, that the Seller and the Borrower shall have no obligation to
make any changes to the Facility Documents which would require the Seller to
provide recourse for uncollectible Receivables; and
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(d) Triple-A shall have received such other approvals or documents as it
may reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO EACH BORROWING. The agreement
of Triple-A to make a Triple-A Loan on the occasion of each Borrowing (including
the initial Borrowing) shall be subject (i) to Triple-A's receipt of (A) a
Settlement Statement for the monthly period ending on the Cut-Off Date in the
case of the initial Borrowing or otherwise for most recent calendar month then
ended, (B) a notice from the Custodian in substantially the form of Exhibit A to
the Custodial Agreement confirming that the Custodian has received the Contract
Files required to be delivered to it pursuant to SECTION 6.03(b) hereof and (C)
such other approvals or documents as Triple-A may reasonably request and (ii) to
the condition precedent that on the Borrowing Date of such Borrowing, before and
after giving effect to such Borrowing and to the application of the proceeds
therefrom, the following statements shall be true (and each of the giving of the
applicable Notice of Borrowing and the acceptance by the Borrower of the
proceeds of such Borrowing shall constitute a representation and warranty by the
Borrower that on the Borrowing Date of such Borrowing, before and after giving
effect thereto and to the application of the proceeds therefrom, such statements
are true):
(i) the representations and warranties contained in Article IV hereof
and all representations and warranties of the Seller in the Purchase
Agreement are true and accurate as of the Borrowing Date in all material
respects with the same force and effect as though such representations and
warranties had been made as of such time;
(ii) no event has occurred and is continuing, or would result from
such Borrowing, which constitutes an Event of Termination or an Unmatured
Event of Termination or a Wind-Down Event or Unmatured Wind-Down Event;
(iii) the outstanding principal amount of the Triple-A Loans after
giving effect to such Borrowing shall be equal to or less than the
Borrowing Base; and
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(iv) the proceeds of such Triple-A Loan shall be used to fund a
Purchase of Transferred Assets under the Purchase Agreement to occur
simultaneously with such Borrowing and all conditions to such Purchase
under the Purchase Agreement on such date have been satisfied or waived.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants to Triple-A that:
(a) DUE INCORPORATION AND GOOD STANDING. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. The Borrower is duly qualified to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the nature of its business requires it to be so qualified or where the
ownership of its properties or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
materially adversely affect (i) the collectibility of the Triple-A Loans, (ii)
the collectibility of any Receivable, (iii) the business, properties,
operations, prospects, profits or condition (financial or otherwise) condition
of the Borrower or (iv) the ability of the Borrower to perform its obligations
hereunder and under the other Facility Documents to which it is a party.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
performance by the Borrower of this Credit Agreement, the Purchase Agreement,
the Triple-A Note, and all other Facility Documents and the transactions
contemplated hereby and thereby, including the acquisition of the Transferred
Assets under the Purchase Agreement and the loans and security interests
contemplated hereunder, are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, do not contravene (i) the
Borrower's charter or by-laws, (ii) any law, rule or regulation applicable to
the Borrower, (iii) any contractual restriction contained in any indenture,
loan or credit agreement, lease, mortgage, security agreement, bond, note, or
other agreement or instrument binding on or affecting the Borrower or its
property or (iv) any order, writ, judgment, award, injunction or decree binding
on or affecting the
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Borrower or its property, and do not result in or require the creation of any
Adverse Claim upon or with respect to any of its properties; and no transaction
contemplated hereby requires compliance with any bulk sales act or similar law.
This Credit Agreement, the Purchase Agreement, the Triple-A Note and the other
Facility Documents to which the Borrower is a party have been duly executed and
delivered on behalf of the Borrower.
(c) GOVERNMENTAL AND OTHER CONSENTS. Except for the filing of
financing statements pursuant to the UCC required to perfect the security
interests granted hereunder or under the other Facility Documents and except for
consents under certain contractual agreements which have been obtained, no
authorization, consent, approval or other action by, and no registration,
qualification, designation, declaration, notice to or filing with, any
governmental authority or other Person is or will be necessary in connection
with the execution and delivery of this Credit Agreement, the Triple-A Note or
any other Facility Document to which the Borrower is a party or any of the other
documents contemplated hereby or thereby, consummation of the transactions
herein or therein contemplated, or performance of or compliance with the terms
and conditions hereof or thereof, to ensure the legality, validity or
enforceability hereof or thereof.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Credit Agreement and
the Triple-A Note and each of the other Facility Documents to which the Borrower
is a party have been duly and validly executed and delivered by the Borrower and
constitute the legal, valid and binding obligation of the Borrower enforceable
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws relating to or affecting
creditors' rights generally and by equitable principles.
(e) NO LITIGATION. There are no actions, suits or proceedings at law
or in equity or by or before any governmental authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
property or rights of the Borrower which purport to challenge the legality,
validity or enforceability of this Credit Agreement or any other Facility
Document or which may materially impair the ability of the Borrower to carry on
business substantially as now being conducted or which may materially adversely
affect the condition
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(financial or otherwise), operations or properties of the Borrower.
(f) USE OF PROCEEDS. No proceeds of any Triple-A Loan will be used
by the Borrower other than to fund a Purchase of Transferred Assets from the
Seller except that the Borrower may net from the Purchase Price paid to the
Seller reasonable and necessary amounts for the funding of its operating
expenses.
(g) PERFECTION OF SECURITY INTEREST IN COLLATERAL. Payment of the
Obligations hereunder and the prompt observance and performance by the Borrower
of all of the terms and provisions of this Credit Agreement are secured by the
Collateral as more fully set forth in ARTICLE VII hereof. Upon the making of
the initial Triple-A Loans, the Collateral Agent will have a legal, valid,
perfected and enforceable Lien upon and first priority security interest in the
Collateral, as security for the repayment of the Obligations, which Lien upon
and security interest in the Collateral is free and clear of all Adverse Claims
except that the Collateral Agent will not have a perfected security interest in
any Collateral constituting Equipment which is owned by the Borrower and located
in a state other than The Commonwealth of Massachusetts.
(h) ACCURACY OF INFORMATION. All certificates, reports, financial
statements and similar writings furnished by or on behalf of the Borrower to
Triple-A, the Collateral Agent, or the Administrative Agent at any time pursuant
to any requirement of, or in response to any written request of any such party
under, this Credit Agreement or any other Facility Document or any transaction
contemplated hereby or thereby, have been, and all such certificates, reports,
financial statements and similar writings hereafter furnished by the Borrower to
such parties will be, true and accurate in every respect material to the
transactions contemplated hereby on the date as of which any such certificate,
report, financial statement or similar writing was or will be delivered, and
shall not omit to state any material facts or any facts necessary to make the
statements contained therein not materially misleading.
(i) GOVERNMENTAL REGULATIONS. The Borrower is not an "investment
company" or a company controlled by an "investment company" registered or
required to be registered under or the Investment Company Act of 1940, as
amended, or otherwise subject
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to any other federal or state statute or regulation limiting its ability to
incur indebtedness.
(j) MARGIN REGULATIONS. The Borrower is not engaged, principally or
as one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" (as each of the quoted
terms is defined or used in Regulation G, T, U or X). No part of the proceeds
of any of the Triple-A Loans has been used for so purchasing or carrying margin
stock or for any purpose which violates, or which would be inconsistent with,
the provisions of Regulation G, T, U or X.
(k) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief place
of business and chief executive office of the Borrower are located at the
address referred to in EXHIBIT E hereof and the locations of the offices where
the Borrower keeps all the Records are listed on EXHIBIT E (or at such other
locations, notified to the Collateral Agent in accordance with SECTION 5.01(f),
in jurisdictions where all action required by SECTION 6.04 has been taken and
completed).
(l) LOCK-BOX ACCOUNTS. Each Obligor under a Contract has, within
one month of the date of Purchase of such Contract, been instructed to remit
payment on the Receivables to a Post Office Box for remittance to a Lock-Box
Account or directly to a Lock-Box Account substantially in the form of EXHIBIT G
to the Purchase Agreement. From and after the Closing Date, the Seller will
have no right, title and/or interest to any of the Lock-Box Accounts and will
maintain no lock-box accounts in its own name for the collection of such
Receivables. The Borrower has caused the Seller to deliver to the Collateral
Agent a duplicate key to each Post Office Box and has filed a standing delivery
order with the United States Postal Service authorizing the Collateral Agent to
receive mail delivered to each such Post Office Box. The account numbers of all
Lock-Box Accounts, together with the names and addresses of all the Lock-Box
Banks maintaining such Lock-Box Accounts and the related Post Office Boxes, are
specified in EXHIBIT H to the Purchase Agreement. The Borrower has no other
Lock-Box Accounts for the collection of the Transferred Assets except for the
Lock-Box Accounts.
(m) NO TRADE NAMES. The Borrower has no trade names, fictitious
names, assumed names or "doing business as" names.
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(n) SEPARATE IDENTITY. The Borrower is operated as an entity
separate from the Seller and each other Subsidiary of the Seller and (i) has its
own board of directors, (ii) has at least one director who is reasonably
acceptable to Triple-A and who is not a direct, indirect or beneficial
stockholder, officer, director, employee, affiliate, associate, customer or
supplier of the Seller nor a relative of any thereof, nor a trustee in
bankruptcy for any Affiliate of the Seller, (iii) maintains its assets in a
manner which facilitates their identification and segregation from those of its
Affiliates, and has a separate telephone number from that of the Seller or any
Subsidiary of the Seller, (iv) has all office furniture, fixtures and equipment
necessary to operate its business and such furniture, fixtures and equipment are
either owned by the Borrower or leased pursuant to written leases, (v) conducts
all intercompany transactions with the Seller and each other Subsidiary of the
Seller on terms which the Borrower reasonably believes to be on an arm's-length
basis, (vi) has not guaranteed any obligation of the Seller or any other
Subsidiary of the Seller, nor has it had any of its obligations guaranteed by
any such entities and has not held itself out as responsible for debts of any
such entity or for the decisions or actions with respect to the business and
affairs of any such entity, (vii) has not, except as otherwise expressly
acknowledged under the Facility Documents, permitted the commingling or pooling
of its funds or other assets with the assets of the Seller or any other
Affiliate, (viii) has separate deposit and other bank accounts to which neither
the Seller nor any other Affiliate has any access and does not at any time pool
any of its funds with those of the Seller or any such Affiliate, (ix) maintains
financial records which are separate from those of the Seller and each other
Subsidiary of the Seller, (x) compensates all employees, consultants and agents,
or reimburses the Seller, from the Borrower's own funds, for services provided
to the Borrower by such employees, consultants and agents, (xi) has agreed with
the Seller to allocate among themselves shared corporate operating services and
expenses which are not reflected in the Servicing Fee (including, without
limitation, the services of shared employees, consultants and agents and
reasonable legal and auditing expenses) on the basis of actual use or the value
of services rendered, and otherwise on a basis reasonably related to actual use
or the value of services rendered, (xii) pays directly for its own account for
accounting and payroll services, rent, lease and other expenses and does not
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have such operating expenses paid by the Seller or any other Subsidiary of the
Seller, (xiii) conducts all of its business (whether in writing or orally)
solely in its own name, (xiv) is not, directly or indirectly, named as a direct
or contingent beneficiary or loss payee on any insurance policy covering the
property of the Seller or any other Subsidiary of the Seller and has entered
into no agreement to be named as such a beneficiary or payee, (xv) acknowledges
that Triple-A, the Administrative Agent, the Surety and the Liquidity Banks are
entering into the transactions contemplated by this Credit Agreement and the
other Facility Documents in reliance on the Borrower's identity as a separate
legal entity from the Seller and each other Subsidiary of the Seller, and (xvi)
practices and adheres to corporate formalities such as complying with its By-
laws and corporate resolutions and the holding of regularly scheduled board of
directors meetings.
(o) SUBSIDIARIES. The Borrower has no Subsidiaries and does not own
or hold, directly or indirectly, any capital stock or equity security of, or any
equity interest in, any Person.
(p) FACILITY DOCUMENTS. The Purchase Agreement is the only agreement
pursuant to which the Borrower purchases Receivables or other Transferred
Assets. The Borrower has furnished to Triple-A true, correct and complete
copies of each Facility Document to which the Borrower is a party, each of which
is in full force and effect. Neither the Borrower nor any Affiliate thereof is
in default of any of its obligations thereunder in any material respect. Upon
the Purchase of each Receivable pursuant to the Purchase Agreement, the Borrower
shall be the lawful owner of, and have good title to, such Receivable and all
Transferred Assets relating thereto, free and clear of any Adverse Claims. All
such Transferred Assets are purchased without recourse to the Seller except as
described in the Purchase Agreement. The Purchases of the Transferred Assets by
the Borrower constitute valid and true sales and transfers for consideration
(and not merely a pledge of such Transferred Assets for security purposes),
enforceable against creditors of the Seller and no Transferred Assets shall
constitute property of the Seller.
(q) BUSINESS. Since its incorporation, the Borrower has conducted no
business other than the execution, delivery and
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performance of the Facility Documents contemplated hereby, the purchase and
servicing of Transferred Assets thereunder, and such other activities as are
incidental to the foregoing. The Borrower has incurred no Indebtedness except
that expressly incurred hereunder and under the other Facility Documents.
(r) OWNERSHIP OF THE BORROWER. One hundred percent (100%) of the
outstanding capital stock of the Borrower is directly owned (both beneficially
and of record) by HPSC, Inc. Such stock is validly issued, fully paid and
nonassessable and there are no options, warrants or other rights to acquire
capital stock from the Borrower.
(s) TAXES. The Borrower has filed or caused to be filed all Federal,
state and local tax returns which are required to be filed by it, and has paid
or caused to be paid all taxes shown to be due and payable on such returns or on
any assessments received by it, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate proceedings
and with respect to which the Borrower has set aside adequate reserves on its
books in accordance with GAAP and which proceedings have not given rise to any
Adverse Claim.
(t) SOLVENCY. The Borrower, both prior to and after giving effect to
the Initial Purchase on the Closing Date, and after giving effect to each
subsequent Purchase, (i) is not "insolvent" (as such term is defined in Section
101(31)(A) of the Bankruptcy Code); (ii) is able to pay its debts as they become
due; and (iii) does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage.
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE BORROWER. From the Closing
Date until the later of the Termination Date or the Collection Date, the
Borrower will, unless Triple-A shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with
all applicable laws, rules, regulations and orders
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with respect to it, its business and properties and all Receivables and related
Contracts.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction except where the failure to preserve
and maintain such existence, rights, franchises, privileges and qualifications
would not materially adversely affect (i) the collectibility of the Triple-A
Loans, (ii) the collectibility of any Receivable, (iii) the business,
properties, operations, prospects, profits or condition (financial or otherwise)
condition of the Borrower or (iv) the ability of the Borrower to perform its
obligations hereunder and under the other Facility Documents to which it is a
party.
(c) AUDITS. At any time and from time to time upon prior written
notice to the Borrower during regular business hours, permit the Collateral
Agent, or its agents or representatives, (i) to examine and make copies of and
abstracts from all Records, and (ii) to visit the offices and properties of the
Borrower for the purpose of examining such Records, and to discuss matters
relating to the Receivables or the Borrower's performance hereunder with any of
the officers or employees of the Borrower having knowledge of such matters.
Each such audit shall be at the sole expense of the Borrower (subject to the
Borrower's right under the Purchase Agreement to recover such expenses from the
Seller); PROVIDED, that, so long as no Wind-Down Event has occurred during any
calendar year, the annual audit expenses during such year for which the Borrower
is responsible shall not exceed $22,000.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Receivables in the event of the
destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of all collections of and adjustments to each
Receivable).
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(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. At
its expense timely and fully perform and comply, and cause the Seller to comply,
in all material respects, with all material provisions, covenants and other
promises required to be observed by it or the Seller under the Contracts.
(f) LOCATION OF RECORDS. Keep its chief place of business and chief
executive office, and the offices where it keeps the Records, at the address of
the Borrower referred to in SECTION 4.01(j), or, in any such case, upon 30 days'
prior written notice to the Collateral Agent, at such other locations within the
United States where all action required by SECTION 6.04 shall have been taken
and completed.
(g) CREDIT AND COLLECTION POLICIES. Comply in all material respects
with the Credit and Collection Policy in regard to each Receivable and the
related Contract.
(h) COLLECTIONS. Instruct all Obligors to cause all Collections to
be deposited directly to a Post Office Box or Lock-Box Account and if the
Borrower shall receive any Collections, the Borrower shall hold such Collections
in trust for the benefit of the Collateral Agent and deposit such Collections
into a Lock-Box Account or the Collection Account within one Business Day
following Borrower's receipt thereof.
(i) COMPLIANCE WITH ERISA. Comply in all material respects with the
provisions of ERISA, the IRC, and all other applicable laws, and the regulations
and interpretations thereunder.
(j) PERFECTED SECURITY INTEREST UNDER CONTRACTS. Take such action
with respect to each Receivable as is necessary to ensure that the Borrower
maintains, as against the Obligor thereunder, a perfected security interest in
any Equipment relating thereto free and clear of Adverse Claims or, in the case
of any Lease, to ensure that the Borrower would maintain such a perfected
priority security interest in the event that a court or other Person were to
determine that such Lease purported to transfer to the Obligor an ownership
(rather than a leasehold) interest in the Equipment subject thereto; PROVIDED,
that the Borrower shall not be required to file financing statements to maintain
the effectiveness of previously filed financing statements with respect to any
Eligible Receivables the
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Outstanding Balance of which has been reduced below $5,000 so long as the
aggregate Outstanding Balance of Receivables for which no such financing
statements are in effect at any time remains less than 10% of the Discounted
Receivables Balance.
(k) MAINTENANCE OF INSURANCE. Maintain, or cause the Seller or each
Obligor to maintain, with respect to the Contracts and the Equipment related
thereto, casualty and general liability insurance which provide at least the
same coverage as a fire and extended coverage insurance policy as is comparable
for other companies in related businesses. Such insurance policies (and self-
insurance where permitted) shall be maintained in an amount which is not less
than the aggregate Discounted Values of the Receivables arising under the
relevant Contracts. Each such casualty and liability policy if maintained by an
Obligor, shall name the Seller or the Borrower as loss payee and additional
insured, and the Seller shall have assigned any such interest to the Borrower.
The Borrower shall remit, or shall cause to be remitted, the proceeds of any
such insurance policy to a Lock-Box Account or the Collection Account.
(l) SEPARATE IDENTITY. Take all actions required to maintain the
Borrower's status as a separate legal entity. Without limiting the foregoing,
the Borrower shall:
(i) conduct all of its business, and make all communications to third
parties (including all invoices (if any), letters, checks and other
instruments) solely in its own name (and not as a division of any other
Person), and require that its employees, if any, when conducting its
business identify themselves as such and not as employees of any other
Affiliate of the Borrower (including, without limitation, by means of
providing appropriate employees with business or identification cards
identifying such employees as the Borrower's employees);
(ii) compensate all employees, consultants and agents directly or
indirectly through reimbursement of the Seller each calendar quarter, from
the Borrower's bank accounts, for services provided to the Borrower by such
employees, consultants and agents and, to the extent any employee,
consultant or agent of the Borrower is also an employee, consultant or
agent of any Affiliate of the Borrower, allocate the compensation of such
employee, consultant or
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agent between the Borrower and such Affiliate on a basis which reflects the
services rendered to the Borrower and such Affiliate;
(iii) pay its own operating expenses and liabilities from its own
funds, allocate all overhead expenses (including, without limitation,
telephone and other utility charges) for items shared between the Borrower
and any Affiliate on the basis of actual use to the extent practicable and,
to the extent such allocation is not practicable, on a basis reasonably
related to actual use and allocate taxes on [the basis of their respective
incomes in accordance with applicable federal regulations];
(iv) at all times have at least one "Independent Director", as defined
in and as required under the Borrower's Certificate of Incorporation and
have at least one officer responsible for managing its day-to-day business
and manage such business by or under the direction of its board of
directors;
(v) maintain its books and records separate from those of any
Affiliate;
(vi) prepare its financial statements separately from those of its
other Affiliates and insure that any consolidated financial statements of
the Seller have notes to the effect that the Borrower is a separate
corporate entity whose creditors have a claim on its assets prior to those
assets becoming available to its equity holders and therefore to any
creditors of the Seller;
(vii) use its best efforts not to commingle its funds or other assets
with those of any other Affiliate, and not to hold its assets in any manner
that would create an appearance that such assets belong to any other
Affiliate, and not maintain bank accounts or other depository accounts to
which any Affiliate is an account party, into which any Affiliate makes
deposits or from which any Affiliate has the power to make withdrawals;
(viii) not permit any Affiliate to pay its operating expenses (except
pursuant to allocation arrangements that comply with the requirements of
SUBSECTION (ii) or (iii) of
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this SECTION 5.01(l) or pursuant to the terms of the Purchase Agreement);
(ix) not guarantee any obligation of any Affiliate nor (to the extent
that the Borrower has the legal power to prevent such) have any of its
obligations guaranteed by any such Affiliate, (either directly or by
seeking credit based on the assets of such Affiliate) or otherwise hold
itself out as responsible for the debts of any Affiliate;
(x) maintain at all times stationery and a telephone number separate
from that of any Affiliate and which telephone number will be answered in
its own name, and have all its officers and employees conduct all of its
business solely in its own name;
(xi) hold regular meetings of its board of directors in accordance
with the provisions of its Certificate of Incorporation and otherwise take
such actions as are necessary on its part to ensure that all corporate
procedures required by its Certificate of Incorporation and by-laws are
duly and validly taken;
(xii) maintain a separate office from the offices of any of its
Affiliates and identify such office by a sign in its own name;
(xiii) pay dividends only if (A) no other dividend has been paid during
the calendar month in which such dividend is paid, (B) such dividend has
been duly authorized by its board of directors in accordance with
applicable law and (C) its net worth, determined immediately after giving
effect to such dividend is at least $2,000,000; and
(xiv) take such other actions as are necessary on its part to ensure
that the facts and assumptions set forth in the opinion described in
SECTION 3.01(x) remain true and correct at all times.
(m) TAXES. File or cause to be filed, and (to the extent it has legal
power to cause such) cause each of its Affiliates with whom it shares
consolidated tax liability to file, all federal, state and local tax returns
which are required to be filed by it, except where the failure to file such
returns
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could not reasonably be expected to have a material adverse effect on the
collectibility of the Transferred Assets or the ability of the Borrower to
perform its obligations hereunder or under any other Facility Document to which
it is a party or which could otherwise be reasonably expected to expose the
Borrower to a material liability. The Borrower shall pay or cause to be paid
all taxes shown to be due and payable on such returns or on any assessments
received by it, other than any taxes or assessments, the validity of which are
being contested in good faith by appropriate proceedings and with respect to
which the Borrower or the applicable subsidiary shall have set aside adequate
reserves on its books in accordance with GAAP and which proceedings could not
reasonably be expected to have a material adverse effect on the collectibility
of the Transferred Assets or the ability of the Borrower to perform its
obligations hereunder or under any other Facility Document to which it is a
party or which could otherwise be reasonably expected to expose the Borrower to
a material liability.
(n) INTEREST RATE HEDGES. Concurrently with each Triple-A Loan,
enter into an Interest Rate Hedge with the Swap Provider as contemplated in the
definition of "Discount Rate", and transfer, assign and otherwise convey to the
Collateral Agent all of the Borrower's rights in, to and under such Interest
Rate Hedge pursuant to an Interest Rate Hedge Assignment in substantially in the
form of EXHIBIT F hereto, together with a certificate executed by the Swap
Provider in substantially the form of Exhibit A to such Interest Rate Hedge
Assignment. The Borrower shall thereafter maintain such Interest Rate Hedges in
full force and effect at all times that the Triple-A Loans remain outstanding,
in a notional amount equal to no less than 96% and no more than 105% of the
outstanding principal amount of the Triple-A Loans and based on an amortization
schedule which matches the amortization of the aggregate Receivables then
outstanding and the terms of which otherwise reasonably satisfactory to the
Collateral Agent. The Borrower acknowledges that Triple-A and/or the Surety on
behalf of Triple-A have guaranteed the Borrower's performance of its obligations
under the Interest Rate Hedges. The Borrower shall perform all of its
obligations under the Interest Rate Hedges to the same extent as if its rights
under the Interest Rate Hedges has not been assigned hereunder and shall
indemnify each of Triple-A and the Surety against any payments by either such
party on account of the Borrower's failure to perform its obligations under the
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Interest Rate Hedges, including, without limitation, any payments by the Surety
under the Swap Bond, which indemnity shall survive any termination of this
Credit Agreement. The exercise by the Collateral Agent of any of its rights
hereunder or under the Interest Rate Hedge Assignment shall not relieve the
Borrower from such obligations.
(o) FACILITY DOCUMENTS. Comply in all material respects with the
terms of and employ the procedures outlined in and enforce the obligations of
the Seller under the Purchase Agreement, and all of the other Facility Documents
to which it is a party, take all such action to such end as may be from time to
time reasonably requested by the Collateral Agent, maintain all such Facility
Documents in full force and effect and make to the Seller such reasonable
demands and requests for information and reports or for action as the Borrower
is entitled to make thereunder and as may be from time to time reasonably
requested by the Collateral Agent.
(p) SEGREGATION OF COLLECTIONS. Prevent the deposit into any of the
Lock-Box Accounts of any funds other than Collections in respect of the
Transferred Assets and, to the extent that any such funds are nevertheless
deposited into any of such Lock-Box Accounts, promptly identify any such funds
to the Servicer for segregation and remittance to the owner thereof.
SECTION 5.02. REPORTING REQUIREMENTS OF THE BORROWER. From the
Closing Date until the later of the Termination Date or the Collection Date, the
Borrower will, unless the Collateral Agent shall otherwise consent in writing,
furnish to the Collateral Agent and to CapMAC:
(a) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Borrower,
balance sheets of the Borrower as of the end of such quarter, and (to the extent
available) statements of income and retained earnings of the Borrower for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, certified by the chief financial officer, chief accounting
officer or treasurer of the Borrower;
(b) as soon as available and in any event within 105 days after the
end of each fiscal year of the Borrower, a copy of the balance sheet of the
Borrower as of the end of such year and
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the related statements of income and retained earnings of the Borrower for such
year each reported on by nationally recognized independent public accountants
acceptable to the Collateral Agent (the Collateral Agent acknowledges that any
of the "Big 5" accounting firms will be acceptable to the Collateral Agent);
(c) promptly upon receipt thereof, copies of (i) all annual and
quarterly financial statements delivered to the Borrower by the Seller pursuant
to the Purchase Agreement and (ii) all other reports and other written
information not specified above which are required to be delivered by the Seller
(individually, or as Servicer) to the Borrower pursuant to the terms of the
Purchase Agreement;
(d) as soon as possible and in any event within five Business Days
after the occurrence of each Event of Termination or Wind-Down Event or each
event which, with the giving of notice or lapse of time or both, would
constitute an Event of Termination or Wind-Down Event, the statement of the
chief financial officer, chief accounting officer or treasurer of the Borrower
setting forth details of such Event of Termination or Wind-Down Event and the
action which the Borrower proposes to take with respect thereto;
(e) promptly after the filing or receiving thereof, copies of all
reports and notices with respect to any Reportable Event defined in Article IV
of ERISA which the Borrower or any Affiliate files under ERISA with the IRS or
the PBGC or the DOL or which the Borrower receives from the PBGC;
(f) on or before the 15th day of each month (or if such day is not a
Business Day, the immediately succeeding Business Day), a copy of the Settlement
Report for the most recent calendar month, which shall include a summary of the
portfolio of Interest Rate Hedges as of such day; and
(g) promptly, from time to time, such other information, documents,
records or reports respecting the Receivables or the conditions or operations,
financial or otherwise, of the Borrower as the Collateral Agent may from time to
time reasonably request in order to protect the interests of the Collateral
Agent or of Triple-A under or as contemplated by this Credit Agreement.
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SECTION 5.03. NEGATIVE COVENANTS OF THE BORROWER. From the Closing
Date until the later of the Termination Date or the Collection Date, the
Borrower will not, without the written consent of the Collateral Agent:
(a) SALES, LIENS, ETC. AGAINST RECEIVABLES AND RELATED SECURITY.
Except as otherwise provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist, any Adverse
Claim upon or with respect to, any Receivable, Related Security, Collections, or
any related Contract, or upon or with respect to any Lock-Box Account to which
any Collections of any Receivable are sent, or assign any right to receive
income in respect thereof, or upon any other Transferred Asset, except that the
Borrower shall have no responsibility for any Adverse Claim created by an
Obligor upon or with respect to any Equipment owned by such Obligor so long as
such Adverse Claim is subordinate to the security interest of the Borrower in
such Equipment.
(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except for actions of the
Servicer otherwise permitted in the Purchase Agreement, extend, amend or
otherwise modify, the terms of any Receivable, or amend, modify or waive, any
term or condition of any Contract related thereto, whether for any reason
relating to a negative change in the related Obligor's creditworthiness or
inability to make any payment under the related Contract or otherwise.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make any
change in the character of its business or in the Credit and Collection Policy,
which change would, in either case, impair the collectibility of any Transferred
Asset.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or terminate any
bank as a Lock-Box Bank from those listed in EXHIBIT I to the Purchase Agreement
or make any change in its instructions to Obligors regarding payments to be made
to the Borrower or payments to be made to any Lock-Box Bank, unless the
Collateral Agent shall have received (i) ten Business Days' prior notice of such
addition, termination or change and (ii) prior to the effective date of such
addition, termination or change, (x) executed copies of Lock-Box Agreements
executed by each new Lock-Box Bank and the Borrower and (y) copies of all
agreements
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and documents signed by either the Borrower or the respective Lock-Box Bank with
respect to any new Lock-Box Account.
(e) STOCK, MERGER, CONSOLIDATION, ETC. Sell any shares of any class
of its capital stock to any Person (other than the Seller) or consolidate with
or merge into or with any other corporation, or purchase or otherwise acquire
all or substantially all of the assets or capital stock, or other ownership
interest of, any Person or sell, transfer, lease or otherwise dispose of all or
substantially all of its assets to any Person, except for the conveyances of a
security interest in favor of the Collateral Agent as expressly permitted under
the terms of this Credit Agreement.
(f) CHANGE IN CORPORATE NAME. Make any change to its corporate name
or use any trade names, fictitious names, assumed names or "doing business as"
names.
(g) ERISA MATTERS. (i) Engage or permit any ERISA Affiliate to
engage in any prohibited transaction for which an exemption is not available or
has not previously been obtained from the DOL; (ii) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the IRC, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make any payments to any
Multiemployer Plan that the Borrower or any ERISA Affiliate may be required to
make under the agreement relating to such Multiemployer Plan or any law
pertaining thereto; (iv) terminate any Benefit Plan so as to result in any
liability; or (v) permit to exist any occurrence of any reportable event
described in Title IV of ERISA which represents a material risk of a liability
of the Borrower or any ERISA Affiliate under ERISA or the IRC; PROVIDED,
HOWEVER, the Borrower's ERISA Affiliates may take or allow such prohibited
transactions, accumulated funding deficiencies, payments, terminations and
reportable events described in clauses (i) through (iv) above so long as such
events occurring within any fiscal year of the Borrower, in the aggregate,
involve a payment of money by or an incurrence of liability of any such ERISA
Affiliate (collectively, "ERISA Liabilities") in an amount which does not exceed
$500,000.
(h) TERMINATE OR REJECT CONTRACTS. Without limiting SECTION 5.03(b),
terminate or reject any Contract prior to the
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term of such Contract, whether such rejection or early termination is made
pursuant to an equitable cause, statute, regulation, judicial proceeding or
other applicable law (including, without limitation, Section 365 of the
Bankruptcy Code), unless prior to such termination or rejection, the Borrower
pays the Collateral Agent, for the benefit of Triple-A, an amount equal to the
Termination Amount owed with respect thereto.
(i) INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness except for (i) Indebtedness to Triple-A, the Collateral Agent or
any Liquidity Bank expressly contemplated hereunder, (ii) Ordinary Course
Expenses (to the extent, if any, that such Ordinary Course Expenses constitute
Indebtedness) in an aggregate amount outstanding at any time not to exceed
$10,000 (exclusive of taxes) and (iii) Indebtedness to the Seller pursuant to
the Purchase Agreement.
(j) GUARANTEES. Guarantee, endorse or otherwise be or become
contingently liable (including by agreement to maintain balance sheet tests) in
connection with the obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations in favor of Triple-A, the
Collateral Agent, or any Liquidity Bank as provided for under this Credit
Agreement.
(k) LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into, or be a
party to any transaction with any Affiliate, except for:
(i) the transactions contemplated by the Purchase Agreement;
(ii) transactions related to the allocation of shared overhead
expenses or taxes as described in clause (iii) of SECTION 5.01(l); and
(iii) to the extent not otherwise prohibited under this Credit
Agreement, other transactions in the nature of employment contracts
and directors' fees, upon fair and reasonable terms materially no less
favorable to the Borrower than would be obtained in a comparable
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arm's-length transaction with a Person not an Affiliate.
(l) FACILITY DOCUMENTS. Except as otherwise permitted under SECTION
10.01, (a) terminate, amend or otherwise modify any Facility Document to which
it is a party, or grant any waiver or consent thereunder, (b) without the prior
consent of the Collateral Agent, exercise any discretionary rights granted to
the Borrower under the Purchase Agreement pursuant to provisions thereof
providing for certain actions to be taken "with the consent of the Buyer",
"acceptable to the Buyer" as "specified by the Buyer", "in the reasonable
judgment of the Buyer" or similar provisions (it being understood that inaction
by the Borrower shall not be considered to be an exercise of such discretionary
rights) or (c) without the prior written consent of the Collateral Agent,
consent to any amendment or modification of the Credit and Collection Policy.
(m) CHARTER AND BY-LAWS. Amend or otherwise modify its Certificate
of Incorporation or By-laws in any manner which requires the consent of the
"Independent Director" (as defined in the Borrower's Certificate of
Incorporation) without the prior written consent of the Collateral Agent and
delivery of an opinion of counsel that such amendment shall not alter the
conclusions set forth in the legal opinion described in SECTION 3.01(x).
(n) LINES OF BUSINESS. Conduct any business other than that
described in SECTION 4.01(p), or enter into any transaction with any Person
which is not contemplated by or incidental to the performance of its obligations
under the Facility Documents.
(o) ACCOUNTING TREATMENT. Prepare any financial statements or other
statements (including any tax filings which are not consolidated with those of
the Seller) which shall account for the transactions contemplated by the
Purchase Agreement in any manner other than as the sale of, or a capital
contribution of, the Transferred Assets by the Seller to the Borrower (it being
understood that non-recognition of such transaction due to the application of
consolidated financial reporting principles under GAAP or the filing of tax
returns on a consolidated basis shall not constitute a violation of this
covenant).
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(p) LIMITATION ON INVESTMENTS. Make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Affiliate or any other Person except for (i) Permitted
Investments, (ii) the purchase of Receivables and other Transferred Assets
pursuant to the terms of the Purchase Agreement and (iii) the acceptance of
investments in exchange for Defaulted Receivables in an effort to maximize the
recoveries thereon.
ARTICLE VI
SECURITY INTEREST
SECTION 6.01. GRANT OF SECURITY INTERESTS. To secure the prompt and
complete payment when due of Obligations and the performance by the Borrower of
all of the covenants and obligations to be performed by it pursuant to this
Credit Agreement, the Borrower hereby assigns and pledges to the Collateral
Agent and grants to the Collateral Agent, on behalf of Triple-A and the Surety,
a security interest in all of the Borrower's right, title and interest in and to
all personal property and all interests in personal property of the Borrower of
any kind or nature, whether tangible or intangible and whether now owned or
existing or hereafter arising or acquired and wheresoever located, including,
without limitation, the following property and interests in property
(collectively, the "COLLATERAL"):
(a) all Receivables, together with all Related Security,
Contracts, Records and other Transferred Assets related thereto,
including, without limitation, all Collections and other monies due
and to become due to the Borrower in respect of any Receivable and any
security therefor;
(b) all right, title and interest of the Borrower in, to and
under the Purchase Agreement, including, without limitation, all
monies due and to become due to the Borrower from the Seller or the
Servicer under or in connection therewith;
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(c) all right, title and interest of the Borrower in, to and under
all computer software used to account for the Transferred Assets and in
which an interest has been assigned under SECTION 2.04 of the Purchase
Agreement;
(d) all right, title and interest of the Borrower in, to and under
all Interest Rate Hedges;
(e) the Collection Account and all other bank and similar
accounts established for the benefit of Triple-A or the Collateral
Agent, and all funds held therein or in such other accounts, and all
income from the investment of funds therein;
(f) all Post Office Boxes, lock boxes, Lock-Box Accounts, and
all other bank and similar accounts relating to the collection of
Receivables and all funds held therein or in such other accounts, and
all income from the investment of funds in the Lock-Box Accounts and
such other accounts;
(g) all certificates and instruments if any, from time to time
representing or evidencing any of the foregoing property described in
clauses (a) through (f) above;
(h) all proceeds of the foregoing property described in clauses
(a) through (g) above, including interest, dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for or on
account of the sale or other disposition of any or all of the then
existing Collateral and including all payments under insurance
(whether or not Triple-A is the loss payee thereof) or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the Collateral; and
(i) all other monies or property of the Borrower coming into the
actual possession, custody or control of the Collateral Agent or
Triple-A (whether for safekeeping, deposit, custody, pledge,
transmission, collection or otherwise).
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SECTION 6.02. CONTINUING LIABILITY OF THE BORROWER. The security
interests described above are granted as security only and shall not subject the
Collateral Agent nor Triple-A nor their respective assigns to, or transfer or in
any way affect or modify, any obligation or liability of the Borrower with
respect to, any of the Collateral or any transaction in connection therewith.
Neither Triple-A nor the Collateral Agent nor their respective assigns shall be
required or obligated in any manner to make any inquiry as to the nature or
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any such obligation, or to make any payment or present or
file any claim, or to take any action to collect or enforce any performance or
the payment of any amount thereunder to which any such Person may be entitled at
any time.
SECTION 6.03. FILINGS; FURTHER ASSURANCES. (a) The Borrower will, at
all times on and after the date hereof, and at its expense, cause UCC financing
statements and continuation statements to be filed in all applicable
jurisdictions as required to continue the perfection of the security interests
created by this Credit Agreement. The Borrower will, from time to time, at its
expense and in such manner and form as the Collateral Agent or its agents or
representatives may reasonably require, execute, deliver, file and record any
other statement, continuation statement, specific assignment or other instrument
or document and take any other action that may be necessary or desirable, or
that Triple-A, its permitted assigns or their respective agents or
representatives, may reasonably request, to create, preserve, perfect or
validate the security interests created hereunder or to enable Triple-A to
exercise and enforce its rights hereunder with respect to any of the Collateral.
(b) The Borrower shall, on or prior to the date of Purchase of any
Receivables, deliver the related Contract File to the Custodian, in suitable
form for transfer by delivery, or accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Triple-A. In the event that the Borrower receives any other instrument or any
writing constituting chattel paper which, in either event, evidences a
Receivable or other Collateral, the Borrower shall deliver such instrument or
chattel paper to the Custodian on behalf of Triple-A within three (3) Business
Days after the Borrower's receipt, in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer
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or assignment in blank, all in form and substance satisfactory to Triple-A.
(c) The Borrower hereby authorizes Triple-A, and gives Triple-A its
irrevocable power of attorney (which authorization is coupled with an interest),
in the name of the Borrower or otherwise, to execute, deliver, file and record
any financing statement, continuation statement, specific assignment or other
paper and to take any other action that Triple-A in its sole discretion may deem
necessary or appropriate to further perfect the security interests created
hereby. The Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Credit Agreement or of a financing statement is sufficient
as a financing statement where permitted by applicable law.
SECTION 6.04. PLACE OF BUSINESS; CHANGE OF NAME. (a) As of the date
hereof, the chief executive office of the Borrower and chief place of business
and the location where it maintains all Records relating to the Receivables and
the other Collateral are maintained are listed on EXHIBIT E hereto. The
Borrower will not (x) change its principal place of business or chief executive
office from the location listed on such Exhibit, (y) change its name, identity
or corporate structure or (z) change the location of its Records relating to the
Collateral from those specified on EXHIBIT E hereto, unless in any such event
the Borrower shall have given the Collateral Agent at least thirty (30) days'
(or such shorter period to which the Collateral Agent may consent in writing)
prior written notice thereof and shall have taken all action necessary or
reasonably requested by the Collateral Agent to amend its existing financing
statements and continuation statements so that they are not misleading and to
file additional financing statements in all applicable jurisdictions to perfect
the security interests of Triple-A in all of the Collateral.
SECTION 6.05. LOCK-BOX ACCOUNTS; COLLECTION ACCOUNT. The Borrower
has established and will maintain a system of operations, accounts and
instructions to the Lock-Box Banks and will establish and maintain the
Collection Account as provided in this SECTION 6.05. Pursuant to a Lock-Box
Agreement, each Lock-Box Account shall be irrevocably instructed to wire all
funds to the Collection Account, which Collection Account shall be maintained in
the name of the Collateral Agent on behalf of Triple-A. Neither the Borrower,
nor any Person claiming by, through or under the Borrower shall have any control
over the use of, or any
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right to withdraw any item or amount from, any Lock-Box Account or the
Collection Account except as expressly provided in the Lock-Box Agreements or
the Collection Account Agreement, respectively. The Collateral Agent on behalf
of Triple-A is hereby irrevocably authorized and empowered, as the Borrower's
attorney-in-fact, to endorse any item deposited in a lock-box or presented for
deposit in any Lock-Box Account or the Collection Account requiring the
endorsement of the Borrower, which authorization is coupled with an interest.
SECTION 6.06. COLLECTION ACCOUNT. (a) On the Closing Date, the
Borrower shall establish for the sole and exclusive benefit of the Collateral
Agent for the benefit of Triple-A, the Surety and their respective assigns, a
cash collateral account (the "COLLECTION ACCOUNT"). The Collection Account
shall be a special purpose segregated trust account maintained with Bank of
Boston but shall be under the sole dominion and control of, and in the name of,
the Collateral Agent. All funds held in the Collection Account, including
investment earnings thereon, shall be invested in Permitted Investments at the
direction of the Borrower; PROVIDED, HOWEVER, that from and after the
Termination Date or otherwise upon the occurrence and during the continuance of
any Event of Termination, the Collateral Agent shall have the sole right to
restrict the maturities of any investments held in the Collection Account and to
direct the withdrawal of any such investments for the purposes of paying the
Obligations, including the principal on the Triple-A Loans. The Collateral
Agent shall have the sole and exclusive right to withdraw or order a transfer of
funds from the Collection Account in accordance with the terms and provisions of
this SECTION 6.06.; PROVIDED however, that the Collateral Agent agrees to turn
over to the Seller any funds which are deposited in the Collection Account and
which do not constitute Collections or other proceeds of Collateral, less all
reasonable and appropriate out-of-pocket costs and expenses incurred by the
Collateral Agent in connection with such misdirected funds.
(b) All funds in the Collection Account shall be held in trust for
the benefit of Triple-A and the Surety and, except as otherwise provided in
SECTION 6.06(d) below with respect to any Business Day from and after the
Designated Termination Date, may be used solely for the following purposes and
in the following order of priority:
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(i) To remit to the Borrower any Collections representing sales or
other taxes or insurance payments for the purpose of satisfying the
Borrower's obligations in respect of such taxes or insurance;
(ii) To pay any Carrying Costs which are then due and payable;
(iii) To make any mandatory prepayments of the Triple-A Loans as
provided in SECTION 2.07;
(iv) To pay any other Obligations which may be due and owing at such
time; and
(v) To make any voluntary prepayments of the Triple-A Loans as
provided in SECTION 2.07; and
(vi) If such day is a Settlement Date, to be remitted to the Borrower
for any purposes not otherwise prohibited by this Credit Agreement or to
the Seller for the Purchase of new Receivables; PROVIDED, however, that
such funds shall only be remitted to the Borrower or the Seller, as
applicable, to the extent that, after giving effect to such transfer of
funds and such Purchases, the principal amount of Triple-A Loans then
outstanding does not exceed the Borrowing Base then in effect.
The Borrower, in making any request for funds to be withdrawn from the
Collection Account, shall certify to each of the Collateral Agent and the
Collection Account Bank that the funds will be used for one of the purposes
described above in this SECTION 6.06(b).
If, on any Business Day prior to the Designated Termination Date, the
funds on deposit in the Collection Account and available for withdrawal under
CLAUSE (ii) above are less than the amount of the obligations described in such
CLAUSE, such available funds shall be allocated in the priority set forth in
SECTION 6.06(c) below; if, on any such Business Day, the funds on deposit in the
Collection Account and available for withdrawal under CLAUSE (iv) above are less
than the amount of the obligations described in such CLAUSE, such available
funds shall be allocated to the Persons to whom such obligations are owed
ratably according to the respective amounts owed.
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(c) On each Business Day prior to the Designated Termination Date, to
the extent that the funds on deposit in the Collection Account and available
under CLAUSE (ii) of SECTION 6.06(b) are insufficient to pay all Carrying Costs
which are then due and payable, such funds shall be applied to the Carrying
Costs in the following order of priority:
(i) To pay any accrued and unpaid interest on the Triple-A Loans
(either directly, by paying to the Swap Provider amounts owed under the
Interest Rate Hedges or by reimbursing Triple-A and/or the Surety for
payments made by either of them to the Swap Provider on account of amounts
owed under the Interest Rate Hedges);
(ii) To pay any accrued and unpaid fees owing under the Fee Letter;
(iii) To pay any accrued and unpaid expenses of the Collateral Agent;
(iv) To pay any accrued and unpaid Servicing Fee; and
(v) To pay ordinary course expenses of the Borrower to the extent
the same are due or past due.
If, on any such Business Day, the funds on deposit in the Collection Account and
available for withdrawal under either CLAUSE (ii) or (v) above are less than the
amount of the obligations described in such CLAUSE, such available funds shall
be allocated to the Persons to whom such obligations are owed ratably according
to the respective amounts owed.
(d) On each Business Day from and after the Designated Termination
Date, funds shall be withdrawn from the Collection Account solely upon direction
of the Collateral Agent to be applied against the Obligations in the following
order of priority;
(i) To remit to the Borrower any Collections representing sales or
other taxes or insurance payments for the purpose of satisfying the
Borrower's obligations in respect of such taxes or insurance;
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(ii) To pay any accrued and unpaid Servicing Fee (if the Servicer is
a party other than the Seller or an Affiliate thereof);
(iii) To pay accrued and unpaid interest on the Triple-A Loans
(either directly or by paying to the Swap Provider amounts owed under the
Interest Rate Hedges or by reimbursing Triple-A and/or the Surety for
payments made by either of them to the Swap Provider on account of amounts
owed under the Interest Rate Hedges);
(iv) To pay any accrued and unpaid fees owing under the Fee Letter;
(v) To repay the principal amount of any Triple-A Loans then
outstanding;
(vi) To pay the accrued and unpaid expenses of the Collateral Agent;
(vii) To pay any other accrued and unpaid Obligations which have not
been paid pursuant to clauses (i) through (vii) above;
(viii) To pay any other Carrying Costs which are due and owing but
have not been paid pursuant to clauses (i) through (vii) above; and
(ix) To pay any accrued and unpaid Servicing Fee owed to the Seller
or an Affiliate thereof.
If, on any such Business Day, the funds on deposit in the Collection Account and
available for withdrawal under either CLAUSE (iv), (vi), (vii) or (viii) above
are less than the amount of the obligations described in such CLAUSE, such
available funds shall be allocated to the Persons to whom such obligations are
owed ratably according to the respective amounts owed. Any funds remaining in
the Collection Account after payment of the foregoing Obligations and other fees
and expenses shall be remitted to the Borrower or as otherwise required by law.
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ARTICLE VII
WIND-DOWN EVENTS; REMEDIES
SECTION 7.01. WIND-DOWN EVENTS. Each of the following events shall
constitute a "WIND-DOWN EVENT" within the meaning of this Credit Agreement:
(a) The occurrence of any Event of Termination;
(b) The Borrower shall fail to make any payment or deposit to be made
by it hereunder when due and, solely in the case of any such payments which do
not constitute payments of principal or interest on the Triple-A Loans, such
failure shall remain unremedied for three Business Days after written notice
from the Collateral Agent; or
(c) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in SECTION 5.03 and any such failure shall remain
unremedied for five Business Days after written notice from the Collateral
Agent; or
(d) Any representation or warranty made or deemed to be made by the
Borrower (or any of its officers) under or in connection with this Credit
Agreement, any Settlement Report or other information or report delivered
pursuant hereto shall prove to have been false or incorrect in any material
respect when made; PROVIDED, HOWEVER, that (i) to the extent any breach of any
such representation or warranty may be cured within ten Business Days, the
Borrower shall have ten Business Days after learning of such breach to make such
representation and warranty true and correct and (ii) if any such false or
incorrect representation or warranty has given rise to a deemed Collection as
provided under SECTION 2.05 of the Purchase Agreement, then, upon the Seller's
payment of such deemed Collection at the time and in the manner required under
the Purchase Agreement, the breach of such representation or warranty shall not
give rise to a Wind-Down Event under this subsection (d); or;
(e) The Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Credit Agreement on its part to be
performed or observed and any such failure shall remain unremedied for ten
Business Days after written notice from the Collateral Agent (it being
understood
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that if any such failure gives rise to a deemed Collection under SECTION 2.05 of
the Purchase Agreement, then, the payment of such deemed Collection at the time
and in the manner required under the Purchase Agreement shall be deemed a remedy
of such failure); or
(f) The security interest of the Collateral Agent in the Collateral
shall for any reason, except to the extent permitted by the terms hereof, cease
to create a valid and perfected first priority interest in such Collateral;
PROVIDED, HOWEVER, if any such failure results in a deemed Collection under
SECTION 2.05 of the Purchase Agreement and the Seller satisfies in full its
payment obligations under such section with respect to such deemed Collection,
then such failure shall not give rise to a Wind-Down Event under this subsection
(f); or
(g) (i) An Insolvency Event shall occur with respect to the Borrower
or the Seller or (ii) the Borrower or the Seller shall take any corporate action
to authorize the filing of any Insolvency Proceeding; or
(h) As of the close of business on any Settlement Date, the Borrowing
Base shall be less than the aggregate outstanding principal amount of all
Triple-A Loans; or
(i) The Seller shall cease to own 100% of the issued and outstanding
stock of the Borrower; or
(j) There shall have occurred, since the Closing Date, a material
adverse change in the financial condition of the Borrower or there shall have
occurred any event which materially and adversely affects the collectibility or
the Receivables generally or the ability of the Borrower to perform hereunder;
or
(k) Triple-A or the Surety shall determine that continuation of this
Credit Agreement without exercise of remedies under SECTION 7.02 will impose a
material adverse regulatory impact on Triple-A or the Surety, as the case may
be.
SECTION 7.02. REMEDIES. During the existence of a Wind-Down Event,
the Collateral Agent on behalf of Triple-A may, by written notice to the
Borrower, take any or all of the following actions, at the same or different
times: (i) declare the Termination Date to have occurred; (ii) declare the
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Obligations to be immediately due and payable; (iii) pursue any other remedy
under this Credit Agreement and the other Facility Documents and (iv) exercise
any rights and remedies of a secured party under Article 9 of the UCC, which
rights and remedies shall be cumulative to those provided for under this Credit
Agreement and the other Facility Documents; PROVIDED, HOWEVER, that in the case
of any event described in clause (i) of SUBSECTION 7.01(g) above, then,
automatically upon the occurrence of such event without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Borrower, anything contained herein or in the Triple-A Note to the contrary
notwithstanding, the Obligations shall be immediately due and payable and the
Termination Date shall be deemed to have occurred automatically. The rights and
remedies of a secured party which may be exercised by the Collateral Agent
pursuant to clause (iv) of this SECTION 7.02 shall include, without limitation,
the right to (y) identify and engage a Successor Servicer to act as servicer for
the Receivables in the event of a Servicing Termination Event, and (z) without
notice except as specified below solicit and accept bids for and sell the
Collateral or any part thereof in one or more parcels at a public or private
sale, at any exchange, broker's board or at any of the Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Collateral Agent may deem commercially reasonable. The
Borrower agrees that, to the extent notice of sale shall be required by law, 10
Business Days' notice to the Borrower of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification and that it shall be commercially reasonable for the
Collateral Agent to sell the Collateral on an as-is basis, without
representation or warranty of any kind. The Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given and may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Credit Agreement nor consent to any departure by the Borrower,
shall in any event be effective unless the same shall be in writing and signed
by (i) the Collateral Agent on behalf of itself and Triple-A and the Borrower
(with respect to an amendment) or (ii) the Collateral Agent on behalf of itself
and Triple-A (with respect to a waiver or consent by it) or the Borrower (with
respect to a waiver or consent by it), as the case may be, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. This Credit Agreement contains a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement (together with
the exhibits hereto) among the parties hereto with respect to the subject matter
hereof, superseding all prior oral or written understandings.
SECTION 8.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, upon receipt,
or in the case of delivery by mail, five days after being deposited in the
mails, or, in the case of notice by telex, when telexed against receipt of
answer back, or in the case of notice by facsimile copy, when verbal
communication of receipt is obtained, in each case addressed as aforesaid,
except that notices and communications pursuant to Article II shall not be
effective until received.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of the
Collateral Agent or Triple-A to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or
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the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 8.04. BINDING EFFECT; ASSIGNABILITY. This Credit Agreement
shall be binding upon and inure to the benefit of the Borrower, Triple-A, the
Collateral Agent and their respective successors and permitted assigns (which
successors of the Borrower shall include a trustee in bankruptcy). The Borrower
may not assign any of its rights and obligations hereunder or any interest
herein without the prior written consent of Triple-A and the Collateral Agent.
Each of Triple-A and the Collateral Agent may assign at any time its rights and
obligations hereunder and interests herein to any other Person without the
consent of the Borrower. Without limiting the foregoing, the Borrower hereby
acknowledges that Triple-A has agreed pursuant to the Liquidity Agreement and
certain related agreements that, subject to the restrictions set forth therein,
certain parties providing credit enhancements and/or liquidity for Triple-A in
connection with the Credit Agreement shall be entitled to exercise Triple-A's
rights under this Credit Agreement and in addition, shall constitute third-party
beneficiaries of this Agreement. The Borrower hereby consents to the foregoing
and agrees to cooperate with any such Person electing to exercise Triple-A's
rights under this Credit Agreement. This Credit Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such time, after the
Termination Date, as the Collection Date shall occur; PROVIDED, HOWEVER, that
the rights and remedies with respect to any breach of any representation and
warranty made by the Borrower pursuant to Article IV and Article VIII shall be
continuing and shall survive any termination of this Credit Agreement.
SECTION 8.05. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS CREDIT
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE INTERESTS OF THE COLLATERAL AGENT IN THE COLLATERAL OR REMEDIES HEREUNDER OR
THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. THE BORROWER HEREBY AGREES TO THE JURISDICTION OF
ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK, AND WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE BORROWER AT
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THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED
IN THE U.S. MAILS, POSTAGE PREPAID, OR, AT THE OPTION OF EITHER TRIPLE-A OR THE
COLLATERAL AGENT, BY SERVICE UPON CT CORPORATION SYSTEM, 1633 BROADWAY, NEW
YORK, NEW YORK 10019, WHICH THE BORROWER HEREBY IRREVOCABLY APPOINTS AS ITS
AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS. THE BORROWER HEREBY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE BORROWER AND TRIPLE-A
AND/OR THE COLLATERAL AGENT ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS CREDIT
AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY. WITH RESPECT TO THE FOREGOING CONSENT TO JURISDICTION,
THE BORROWER HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT. NOTHING IN THIS SECTION 8.05 SHALL AFFECT THE RIGHT OF TRIPLE-A OR THE
COLLATERAL AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF TRIPLE-A OR THE COLLATERAL AGENT TO BRING ANY ACTION OR
PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 8.06. COSTS, EXPENSES AND TAXES. (a) The Borrower agrees to
pay on demand all reasonable costs and expenses in connection with the
preparation, execution, delivery and administration (including periodic auditing
fees as provided for in SECTION 5.01(c) and any requested amendments, waivers or
consents) of this Credit Agreement and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for Triple-A and the Collateral Agent with respect thereto
and with respect to advising Triple-A and the Collateral Agent as to its rights
and remedies under this Credit Agreement, and the other agreements executed
pursuant hereto and all costs and expenses, if any (including reasonable counsel
fees and expenses), in connection with the enforcement of this Credit Agreement
and the other agreements and documents to be delivered hereunder.
(b) In addition, the Borrower shall pay any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution,
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delivery, filing and recording of this Credit Agreement or the other agreements
and documents to be delivered hereunder, and agrees to indemnify the Collateral
Agent, Triple-A and their respective assignees against any liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
SECTION 8.07. EXECUTION IN COUNTERPARTS; SEVERABILITY. This Credit
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same agreement. In case any provision in or obligation under this Credit
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 8.08. NO BANKRUPTCY PETITION AGAINST TRIPLE-A. The Borrower
covenants and agrees that it will not institute against Triple-A, or join any
other Person in instituting against Triple-A, any Insolvency Proceeding under
bankruptcy law or under any similar federal or state law.
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IN WITNESS WHEREOF, the parties below have caused this Credit
Agreement to be duly executed by their duly authorized officers and delivered as
of the day and year first above written.
HPSC BRAVO FUNDING CORP.
By: /s/ John Everets, Jr.
-------------------------------------
John Everets, Jr.
Title: President
Address: Sixty State Street
35th Floor
Boston, MA 02109-1803
Attn: President
Telephone: (617) 720-7251
Telecopy: (617) 720-7272
TRIPLE-A ONE FUNDING CORPORATION
By: Capital Markets Assurance
Corporation, its Attorney-in-Fact
By: /s/ Authorized Signatory
------------------------------------
Authorized Signatory
Title: Vice President
Address: 885 Third Avenue
New York, New York 10022
Attn: Head of Exposure Management
Telephone: (212) 755-1155
Telecopy: (212) 755-5487
CAPITAL MARKETS ASSURANCE CORPORATION
By: /s/ Authorized Signatory
------------------------------------
Authorized Signatory
Title: Vice President
Address: 885 Third Avenue
New York, New York 10022
Attn: Head of Exposure Management
Telephone: (212) 755-1155
Telecopy: (212) 755-5487
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EXHIBIT 10.33
HPSC, INC.
Agreement to Furnish Copies of Omitted Exhibits
to Certain Agreements with HPSC Bravo Funding Corp.
---------------------------------------------------
HPSC, Inc. ("Registrant") is not filing as exhibits to its Annual Report
on Form 10-K for its fiscal year ended December 31, 1994 copies of the
following exhibits to the following agreements dated January 31, 1995
among Registrant, HPSC Bravo Funding Corp. and various other parties, which
agreements are so filed as Exhibits 10.31 and 10.32, respectively, thereto:
exhibits identified on page iv of the Purchase and Contribution Agreement;
and exhibits identified in the Credit Agreement.
Registrant agrees to furnish to the Securities and Exchange Commission,
upon request, copies of such omitted exhibits.
HPSC, INC.
(Registrant)
Dated: March 27, 1995 By: /s/ John W. Everets
--------------------
John W. Everets
Chairman of the Board
Chief Executive Officer
<PAGE>
EXHIBIT 13
HPSC INNOVATIVE FINANCIAL
SERVICES
1994 ANNUAL REPORT
"We have made
substantial
progress toward our goal:
becoming the
financial services
company serving
the healthcare
professional."
Volume 4th Quarter 1994:
$12,480,000
Year: $32,609,000
Best 4th Quarter Volume since 1988
Stock Repurchase
Stock Price: (High) 4, (Low) 3 1/4
Volume 3rd Quarter 1994:
$9,185,000
Best Volume in 15 Quarters
Volume 2nd Quarter 1994:
$6,296,000
Stock Price: (High) 4 1/8, (Low) 3 1/4
Added: American Commercial Finance Corporation
Added: Midwest Division
Volume 1st Quarter 1994:
$4,648,000
Volume 4th Quarter 1993:
$3,403,000
$70 million asset securitization
Stock Price: (High) 4, (Low) 3 1/4
*Volume 3rd Quarter 1993:
$3,031,000
Strategic Planning begins
June 1993:
Healthco International Bankruptcy
Stock Price: (High) 4, (Low) 2
* Transactions activated - at cost
<PAGE>
MARK TWAIN
Life on the Mississippi:
"Two things seemed pretty apparent to me. One was, that in order to be a pilot a
man had got to learn more than any one man ought to be allowed to know; and the
other was, that he must learn it, all over again in a different way every
twenty-four hours."
JOHN W. EVERETS
Chairman, Chief Executive Officer, HPSC, Inc.:
"...not unlike the financial services business."
<PAGE>
TO OUR STOCKHOLDERS
1994 was a year of transition for your company as we sought to rebuild our
portfolio and improve operations and customer service in the wake of the
bankruptcy of our sole vendor, Healthco International, Inc. The challenge was
significant; but our people have met it head on, and I am proud to report that
we have closed the year having made significant progress on all fronts. In last
year's annual report, I listed seven key goals for this transition period. Let
me report on them here:
[Photograph]
HPSC EXHIBITS AT MAJOR HEALTHCARE CONVENTIONS.
1. ACHIEVE A HIGHLY COMPETITIVE RETURN ON STOCKHOLDERS' EQUITY - Your company
was profitable in every quarter during this transition year.
2. CREATE A HIGH QUALITY, DIVERSIFIED PORTFOLIO OF LEASES AND NOTES SECURED BY
EQUIPMENT AND MERCHANDISE WITH PRIMARY EMPHASIS ON THE HEALTHCARE
PROFESSIONS, INCLUDING BUT NOT LIMITED TO THE DENTAL PROFESSION - The HPSC
portfolio has expanded to include six medical specialties as well as
asset-based lending.
3. INCREASE SUBSTANTIALLY THE SIZE OF THE PORTFOLIO THROUGH NEW BOOKINGS AND
PORTFOLIO ACQUISITIONS - By the fourth quarter of 1994, our backlog had
grown substantially as compared to the same period in 1993. Fourth quarter
volume of more than $12,000,000 was the largest since 1989.
[Photograph]
PODIATRY EXAMINING CHAIR
4. BUILD INVESTOR CONFIDENCE SO HPSC STOCK IS PRICED AT AN APPROPRIATE
PREMIUM-TO-BOOK VALUE - In 1994, our increased bank credit line, growing
backlog, portfolio securitizations and stock repurchase have contributed to
increased investor confidence.
5. OFFER HPSC CUSTOMERS AND VENDORS EXCELLENT SERVICE - Our focus on customer
service last year contributed greatly to strong repeat business from
existing customers, as well as to a growing backlog.
6. INCREASE SIGNIFICANTLY THE NUMBER OF VENDORS WE NOW SERVE - In 1993 we had
one vendor relationship; at the end of last year we had 100 vendor
relationships.
[Photograph]
DENTAL OPERATORY WITH INTRA-ORAL CAMERA
7. MAINTAIN STRONG CONTROLS ON OVERHEAD EXPENSES WHILE MANAGING OPERATIONS
THROUGH STATE-OF-THE-ART DATA PROCESSING - During the year, we expanded our
services nationwide and still maintained profitability. Furthermore, we
began development and testing of an enterprise-wide data processing system
that is expected to be fully operational this summer, enabling us to provide
greater levels of customer service with highly competitive rates.
1
<PAGE>
[Photograph]
PANORAMIC X-RAY
Several developments in 1994 had an impact on the medical leasing market
generally and on HPSC specifically. An important emerging influence was the
rapid technological advancement in imaging, computer and diagnostic equipment.
As these technologies lead to new and better medical products, companies that
are focused on understanding and serving the equipment financing needs of the
medical community at competitive rates should continue to find new
opportunities.
[Photograph]
HOSPITAL NEONATAL INTENSIVE CARE UNIT
Technology is also having a strategic impact on our own business because it
contributes to our goal of providing unparalleled service to our customers. When
fully operational, HPSC's new data processing technology will allow us to
automate labor-intensive processes, providing faster responses to customer
requests, more complete and accurate reporting and significant time savings for
both the Company and its customers.
[Photograph]
QUARTERLY NEWSLETTER
Another development was the failure of Congress to enact national healthcare
legislation, which may have led to a greater willingness of doctors to consider
purchasing new equipment. In addition, the prospects for reduced or stable
lending rates and a healthier economy should continue to contribute to a feeling
of greater security in the national medical equipment market.
We also established sales locations in northern California, southern California,
Georgia, Missouri and Illinois. We currently have customers in all fifty states,
and our ongoing strategy is to establish sales offices in strategic markets that
have a critical mass of customers and represent a healthy environment for
medical equipment purchases. Our regional growth strategy, coupled with our
focus on broadening the medical specialties we serve, is expected to help
insulate the Company against the periodic regional economic downturns. In
addition, in 1994 we formed American Commercial Finance Corporation (ACFC), a
wholly-owned subsidiary, to provide asset-based lending, which immediately began
building its portfolio.
OB/GYN MONITOR
2
<PAGE>
[Photograph]
PHYSICIAN'S EXAMINING ROOM
As we progress through 1995, we will continue to work to meet our goals of
increased volume, portfolio growth, and profitability during this time of
transition. We intend to accomplish these goals by becoming the finance company
of choice for the medical profession through relationships with our customers
that reflect the same level of commitment and attention they bring to their own
professions, through ongoing efforts to add value via increased support and
innovative, highly competitive financing programs.
[Photograph]
OPEN-PLAN DENTAL OFFICE
As always, our employees have been, and will continue to be, critical to any
progress we make. Now, through their own direct investment and our employee
stock plans, most are shareholders.
[Photograph]
OPHTHALMIC EXAMINING LANE
We began the difficult transition effort in the last quarter of 1993. Along with
our dedicated board of directors, committed senior management, and employees at
all levels, we have made substantial progress. Now, as we go through 1995 and
beyond, we are optimistic about the future.
/S/ John W. Everets
John W. Everets
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
HEALTHCARE MARKETS
SERVED BY HPSC
ACTIVE PRACTITIONERS
OFFICE BASED*
Dentistry 120,000
Chiropractic 53,000
OB/GYN 33,000
Ophthalmology 16,000
Optometry 36,000
Podiatry 12,500
Veterinary 51,000
-----------------------------------
TOTAL 321,500
*Estimates from trade sources.
3
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 25,
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) 1994 1993
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 419 $ 16,600
RESTRICTED CASH 7,936 --
INVESTMENT IN LEASES AND NOTES:
Lease contracts receivable and notes receivable due in installments 103,531 126,369
Estimated residual value of equipment at end of lease term 9,321 12,325
Less unearned income (16,924) (21,803)
Less allowance for losses (4,595) (6,897)
Less security deposits (2,639) (2,860)
Deferred origination costs 2,499 2,618
----------------------------------------------------------------------------------------------------------
Net investment in leases and notes 91,193 109,752
----------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Other assets 2,154 1,812
Refundable income taxes 1,446 2,273
----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 103,148 $ 130,437
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE TO BANKS $ 16,500 $ 7,130
NOTES PAYABLE - TREASURY STOCK PURCHASE 4,500 --
ACCOUNTS PAYABLE 2,450 5,348
ACCRUED INTEREST 293 3,434
INCOME TAXES:
Currently payable 20 310
Deferred 5,539 6,632
SENIOR NOTES 41,024 50,000
SUBORDINATED DEBT (net of unamortized discount of $38) -- 19,962
----------------------------------------------------------------------------------------------------------
Total Liabilities 70,326 92,816
----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1.00 par value; authorized 5,000,000 shares; Issued - None -- --
Common Stock, $.01 par value; 15,000,000 shares authorized;
and issued 5,574,395 in 1994 and 4,923,571 shares in 1993 56 49
Treasury Stock (at cost) 1,225,182 shares (5,023) --
Additional paid-in capital 15,916 13,645
Retained earnings 24,601 24,151
Cumulative foreign currency translation adjustments (552) (224)
----------------------------------------------------------------------------------------------------------
34,998 37,621
Less deferred ESOP and SESOP compensation (2,176) --
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 32,822 37,621
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 103,148 $ 130,437
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS. 4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
EACH OF THE YEARS ENDED
-------------------------------------------
DECEMBER 31, DECEMBER 25, DECEMBER 26,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS) 1994 1993 1992
<S> <C> <C> <C>
REVENUES
Earned income on leases and notes $ 12,319 $ 17,095 $ 21,734
Provision for losses (754) (15,104) (4,307)
--------------------------------------------------------------------------------------------------
Net Revenues 11,565 1,991 17,427
--------------------------------------------------------------------------------------------------
EXPENSES
Selling, general and administrative 6,970 5,160 3,574
Interest, net 3,845 8,979 10,609
--------------------------------------------------------------------------------------------------
Total Expenses 10,815 14,139 14,183
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Income (Loss) before Income Taxes 750 (12,148) 3,244
--------------------------------------------------------------------------------------------------
Provision (Benefit) for Income Taxes 300 (4,870) 1,260
--------------------------------------------------------------------------------------------------
Net Income (Loss) $ 450 $ (7,278) $ 1,984
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Net Income (Loss) per Share $ .09 $ (1.48) $ .40
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Shares Used to Compute Net Income (Loss) per Share 4,989,391 4,923,233 4,922,473
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS. 5
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFERRED CUMULATIVE
COMMON STOCK ADDITIONAL ESOP & FOREIGN CURRENCY
(IN THOUSANDS, EXCEPT -------------------- PAID-IN RETAINED TREASURY SESOP TRANSLATION
SHARE AMOUNTS) SHARES AMOUNT CAPITAL EARNINGS STOCK COMPENSATION ADJUSTMENTS TOTAL
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 28, 1991 4,921,427 $ 49 $ 13,640 $ 29,445 $ -- $ -- $ 251 $43,385
Issuance of Common Stock 1,250 -- 3 -- -- -- -- 3
Net income -- -- -- 1,984 -- -- -- 1,984
Foreign currency translation
adjustments -- -- -- -- -- -- (331) (331)
----------------------------------------------------------------------------------------------------------------------
Balance at
December 26, 1992 4,922,677 49 13,643 31,429 -- -- (80) 45,041
Issuance of Common Stock 894 -- 2 -- -- -- -- 2
Net loss -- -- -- (7,278) -- -- -- (7,278)
Foreign currency translation
adjustments -- -- -- -- -- -- (144) (144)
----------------------------------------------------------------------------------------------------------------------
Balance at
December 25, 1993 4,923,571 49 13,645 24,151 -- -- (224) 37,621
Issuance of Common Stock 824 -- 3 -- -- -- -- 3
Net income -- -- -- 450 -- -- -- 450
Purchase of Treasury Stock -- -- -- -- (5,023) -- -- (5,023)
Issuance of Common Stock
to ESOP & SESOP 650,000 7 2,268 -- -- (2,275) -- --
ESOP Compensation -- -- -- -- -- 99 -- 99
Foreign currency translation
adjustments -- -- -- -- -- -- (328) (328)
-----------------------------------------------------------------------------------------------------------------------
Balance at
DECEMBER 31, 1994 5,574,395 $56 $15,916 $24,601 $(5,023) $(2,176) $(552) $32,822
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS. 6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED
-----------------------------------------
DECEMBER 31, DECEMBER 25, DECEMBER 26,
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $450 $(7,278) $1,984
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 450 1,088 982
Deferred income taxes (1,093) (4,333) (1,483)
Provision for losses on lease contracts and notes receivable 754 15,104 4,307
(Decrease) in accrued interest (3,141) (79) (392)
(Decrease) increase in accounts payable (2,898) 882 (893)
(Decrease) increase in accrued income taxes (290) (880) 1,035
Decrease (increase) in refundable income taxes 827 (1,968) 214
Decrease (increase) in other assets 837 (953) (225)
----------------------------------------------------------------------------------------------------------
Cash (used in) provided by operating activities (4,104) 1,583 5,529
----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (625) (214) (114)
Proceeds from sale of receivables 6,958 -- --
Lease contracts receivable and notes receivable 11,957 41,136 26,269
Estimated residual value of equipment 2,339 2,734 1,599
Unearned income (3,346) (11,988) (9,782)
Security deposits (221) (603) (131)
Deferred origination costs 119 923 269
----------------------------------------------------------------------------------------------------------
Cash provided by investing activities 17,181 31,988 18,110
----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of senior notes (78,976) -- (18,000)
Repayment of subordinated debt (20,000) -- --
Repayment of notes payable to banks -- (14,000) (24,400)
Proceeds from issuance of senior notes 70,000 -- --
Increase in notes payable treasury stock purchase 4,500 -- --
Net (decrease) increase in demand notes payable to banks (7,130) (3,454) 991
Proceeds from revolving notes payable to banks 16,500 -- 14,400
Purchase of treasury stock (5,023) -- --
Debt issuance costs (967) -- --
Increase in restricted cash (7,936) -- --
Proceeds from issuance of common stock 3 2 3
Contribution to employee stock ownership plan 99 -- --
Other (328) (144) (331)
----------------------------------------------------------------------------------------------------------
Cash used in financing activities (29,258) (17,596) (27,337)
----------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (16,181) 15,975 (3,698)
Cash and cash equivalents at beginning of year 16,600 625 4,323
----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $419 $16,600 $625
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Interest paid $7,105 $8,103 $10,170
Income taxes paid 2,018 2,587 1,719
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS. 7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A
-------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - Until Healthco International, Inc. ("Healthco") filed for bankruptcy
on June 9, 1993, Healthco referred to the Company substantially all of the
Company's financing business. Healthco was a leading distributor of merchandise,
equipment and services to dentists and institutional providers of dental care,
including dental schools and dental laboratories. Healthco also provided certain
sales and related services to the Company as well as certain management, data
processing and administrative services to the Company.
Healthco also owned 1,949,182 shares of the Company's Common Stock, which it had
pledged to certain of its secured creditors (the "Secured Creditors") and, as a
result of the bankruptcy of Healthco, the Secured Creditors and the Company made
certain claims against each other for moneys due.
During 1994, HPSC replaced substantially all of the business that was previously
referred to it by Healthco with business from other vendors and now provides for
itself the sales, management, data processing and administrative services
previously provided by Healthco.
As of November 1, 1994, the Company entered into a Purchase and Sale Agreement
with the Secured Creditors pursuant to which the Company and certain individual
investors agreed to acquire the shares of the Company's stock pledged to the
Secured Creditors and to resolve all claims, which may arise out of the Healthco
bankruptcy, between the Company and the Secured Creditors. The total
consideration to be paid under the Purchase and Sale Agreement was $9 million,
$4.5 million to be paid at closing and $4.5 million to be paid in the form of a
six-month promissory note, collateralized by the shares of HPSC Common Stock
purchased by the Company. On December 30, 1994, the Company and the Secured
Creditors closed the transaction provided for in the Purchase and Sale
Agreement. The Company acquired 1,225,182 shares of its Common Stock, subject to
the pledge of those shares to the Secured Creditors. Individual investors
acquired the remaining 724,000 shares. Mutual releases of claims were exchanged
at the closing; provided, that the release of the Secured Creditors' claims
against HPSC, if any, is contingent upon the Company's repayment in full of the
note.
The Company entered into an agreement to sell substantially all the finance
assets of Credident Inc. ("Credident"), the Company's Canadian subsidiary,
effective June 30, 1994, to Newcourt Credit Group, Inc. ("Newcourt") for
approximately (US) $7 million cash. The Company also entered into a service
agreement whereby Newcourt will manage certain accounts over the next two years
for a fee related to collections. The sale did not have a material effect on the
Company's operations. Subsequent to the sale, all of Credident's Canadian bank
debt was retired. The sale of substantially all of Credident's finance assets is
consistent with the Company's strategic plan to focus on its business in the
United States. As of December 31, 1994, in light of the fact that the Company
had discontinued its Canadian operations, the Company wrote off all assets
deemed uncollectible at that time. Credident's total assets at December 31,
1994, were approximately 1.5% of the Company's total consolidated assets and
Credident's earned revenues represented 4.0% of total consolidated earned
revenues.
CONSOLIDATION - The accompanying consolidated financial statements include the
following wholly-owned subsidiaries: HPSC Funding Corp. I ("HPSCF"), a
special-purpose corporation formed in connection with a securitization
transaction; Credident, and American Commercial Finance Corporation ("ACFC"), an
asset-based lender focused primarily on accounts receivable and inventory
financing at variable rates. All intercompany transactions have been eliminated.
REVENUE RECOGNITION - At the inception of a transaction, the Company records the
minimum payments and the estimated residual value, if any, associated with the
transaction. The difference between the sum of the payments due plus residual
less the cost of the transaction is recorded as unearned income. The unearned
income is recognized as revenue over the life of the transaction using the
interest method in substantially all cases. Recognition of revenue on these
assets is suspended no later than when a transaction becomes 145 days delinquent
in scheduled payments.
CASH AND EQUIVALENTS - The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents.
FINANCING OPERATIONS - The Company provides credit to healthcare professionals.
The Company finances dental, ophthalmic, chiropractic, veterinary, podiatry and
other medical equipment utilized in the healthcare professions, as well as
leasehold improvements, office furniture and equipment and certain other costs
involved in opening or maintaining a healthcare provider's office. The Company
also finances the acquisition of healthcare practices by healthcare
professionals and, through its wholly-owned subsidiary, ACFC, engages in
asset-based lending.
The Company finances equipment only after a customer's credit has been approved
and a financing agreement for the transaction has been executed. The Company
performs ongoing credit evaluations of its customers and maintains allowances
for potential credit losses.
The Company does not carry any inventory. The Company acquires the financed
equipment from vendors at their customary selling price to other customers.
ALLOWANCE FOR LOSSES - In connection with the Company's financing transactions,
it records an allowance for losses in its portfolio. The extent of the allowance
is based on a specific analysis of potential loss accounts, delinquencies and
historical loss experiences. An account is reserved for or written off when
deemed uncollectible.
The Company occasionally repossesses equipment from lessees who have defaulted
on their obligations to the Company. The amount of such equipment held for sale
at December 31, 1994 was $0 compared to $7,800 at December 25, 1993.
8
<PAGE>
Substantially all of the Company's financing agreements with its customers are
non-cancelable and provide for
a full payout at a fixed financing rate with a fixed payment schedule over a
term of three to seven years. All leases
are classified as direct financing leases.
Delinquent installments on the Company's financing
agreements amounted to $3,496,000 at December 31, 1994 compared to $4,805,000 at
December 25, 1993. An account
is considered delinquent when not paid within thirty days of the billing due
date. Total balances on accounts in
non-accrual status at December 31, 1994, and December 25, 1993, were $6,181,000
and $7,395,000, respectively.
INCOME TAXES - Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes",
which requires the use of the liability method of accounting
for deferred income taxes. The cumulative effect of the adoption of SFAS 109 was
not material for fiscal year 1993. Under the provisions of SFAS 109, the Company
elected not to restate prior years' financial statements. Investment and similar
credits are applied as a reduction of US income taxes using the flow-through
method.
TRANSLATION OF FOREIGN CURRENCIES - The assets and liabilities of Credident are
translated at the exchange rate in effect
at each year-end and the related translation adjustments are deferred as a
separate component of stockholders'
equity. Income statement accounts are translated at the average rate of exchange
prevailing during the year.
INCOME (LOSS) PER SHARE - Income per share computations for the years ended
December 31, 1994, and December 26, 1992, are based on the weighted average
number of common and common share equivalents outstanding. At December 31, 1994,
the calculation included only allocated shares under the Company's ESOP and
SESOP plans. Fully diluted and primary income per share are the same for each of
the periods presented. For the year ended December 25, 1993, the weighted
average number of common shares
outstanding was used to calculate (loss) per share.
DEFERRED ORIGINATION COSTS - The Company capitalizes initial direct costs that
directly relate to the origination of leases and notes receivable. These initial
direct costs are comprised of certain specific activities related to processing
requests for financing. Deferred origination costs are amortized
over the life of the receivable as an adjustment of yield.
NOTE B
-------------------------------------------------------------------------------
NOTES PAYABLE TO BANKS AND OTHER DEBTS
The Company retired its outstanding $50,000,000 10.125% Senior Notes with the
proceeds of the Securitization described below (principal and interest of
$52,527,000) on December 27, 1993. The Company's $20,000,000 10% Subordinated
Notes were retired at par value plus accrued interest of $1,000,000 on January
15, 1994.
The Company raised $70,000,000 in a receivable-backed securitization transaction
("Securitization") on December 27, 1993. Under the terms of the Securitization,
the Company formed a wholly-owned, special-purpose subsidiary, HPSC Funding
Corp. I ("HPSCF") to which the Company sold or contributed certain of its
equipment lease contracts, conditional sales agreements, leasehold improvement
loans, equipment residual rights and rights to underlying equipment
("Collateral"). HPSCF subsequently issued $70,000,000 of secured notes
("Notes"), bearing interest at 5.01%, secured by the Collateral. The Notes are
rated "AAA" by Standard & Poor's. Monthly payments of interest and principal on
the Notes are made through the application of regularly scheduled monthly
receivable payments on the Collateral. The Company is the servicer of the
Collateral portfolio, subject to its meeting certain covenants. The required
monthly payments of interest and principal to holders of the Notes are
unconditionally guaranteed by Municipal Bond Investor Assurance Corporation
pursuant to the terms of a Note guarantee insurance policy.
In connection with the Securitization, the Company made an investment in HPSCF.
Some or all of the Company's investment in HPSCF may be required to fund
payments to holders of the Notes if certain default and delinquency ratios
applicable to the Collateral are not met. As of December 31, 1994, HPSCF had
approximately $53,903,000 of gross receivables as collateral to the Notes. The
Agreement also provides for restrictions on cash balances under certain
conditions; at December 31, 1994, this restricted cash amounted to $7,936,000.
Note payments to investors, based on projected cash flows from the Collateral,
for the years 1995 through 1999 are expected to be as follows: $19,263,000,
$13,419,000, $6,270,000, $1,744,000 and $328,000, respectively.
On June 23, 1994, the Company executed a $20,000,000 revolving credit agreement
with the First National Bank of Boston as Agent Bank ("Revolving Loan
Agreement"). Under this agreement, the Company may acquire US dollar loans at
variable rates of prime plus 1/4% to 1/2% or Eurodollar loans at LIBOR plus
1.75% to 2.0%, depending on certain performance covenants and borrowing base as
defined in the agreements. At December 31, 1994, the Company had $3,500,000
available under this agreement. This agreement expires at December 31, 1995. In
February, 1995, the Revolving Loan Agreement was amended to increase
availability under the Agreement to $25,000,000 through April 30, 1995.
As of November 30, 1994, the Company executed a Purchase and Sale Agreement with
the Healthco Secured Creditors (as described in Note A) to purchase 1,225,182
shares for $6,285,000, payable $1,785,000 at closing (December 30, 1994) and
$4,500,000 pursuant to a Promissory Note which provides for six equal monthly
payments of $750,000 beginning February 1, 1995.
As of January 31, 1995, the Company, along with its newly-formed, wholly-owned,
special-purpose subsidiary, HPSC Bravo Funding Corp. ("Bravo") completed a
$50,000,000 revolving credit facility structured and guaranteed by Capital
Markets Assurance Corporation ("CapMAC"). Under the terms of the facility,
Bravo, to which the Company has sold and may continue to sell or contribute
certain of its portfolio assets, pledges its interests in these assets to a
commercial-paper conduit entity. Bravo incurs interest at variable rates
9
<PAGE>
in the commercial paper market and enters into interest rate swap agreements to
assure fixed rate funding.
Monthly settlements of principal and interest payments are made from the
collection of payments on Bravo's transactions. Additional sales to Bravo from
HPSC may be made subject to certain covenants regarding Bravo's portfolio
performance and borrowing base calculations.
The Company is the servicer of the Bravo portfolio, subject to meeting certain
covenants. The required monthly payments of principal and interest to purchasers
of the commercial paper are guaranteed by CapMAC pursuant to the terms of the
agreement.
Amortization of debt discount of $38,000, $872,000, and $763,000 in 1994, 1993,
and 1992, respectively, is included in interest expense. Deferred underwriting
expense of $975,000 (included in other assets) was amortized over a ten-year
term of the Subordinated Notes.
The Company's long-term debt, as shown on the accompanying balance sheet,
reflects its approximate fair market value. The fair market value is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same maturity.
Certain debt/securitization agreements contain restrictive covenants which,
among other things, include minimum net worth, interest coverage ratios, capital
expenditures, and portfolio performance guidelines. At December 31, 1994, the
Company was in compliance with the provisions of its debt covenants.
Debt of the Company as of December 31, 1994, and December 25, 1993 is summarized
below.
<TABLE>
<CAPTION>
DEC. 31, DEC. 25,
(IN THOUSANDS) 1994 1993
----------------------------------------------------------
<S> <C> <C>
Senior Notes
Due Dec. 28, 1993 -- $ 50,000
Senior Notes (HPSCF)
Due Dec., 1999 $ 41,024
Notes Payable - treasury
stock purchase
Due July 1, 1995 4,500
Subordinated Notes, less
unamortized discount,
Due Jan. 15, 1994 -- 19,962
Bank Borrowings:
Bank of Montreal
credit line with
interest at prime
(5 1/2% at Dec. 25,
1993) due on demand -- 7,130
Revolving credit arrangement
Due Dec. 31, 1995 16,500
----------------------------------------------------------
Total $ 62,024 $ 77,092
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
Interest expense is net of interest income of $358,000, $78,000 and $54,000 in
1994, 1993, and 1992, respectively.
NOTE C
-------------------------------------------------------------------------------
LEASE COMMITMENTS
The Company leases various office locations under non-cancelable lease
arrangements that have terms of from three to five years and that generally
provide renewal options from one to five years. Rent expense under all operating
leases was $198,000, $92,000 and $163,000 for 1994, 1993 and 1992, respectively.
Future minimum lease payments for commitments exceeding twelve months under
non-cancelable operating leases as
of December 31, 1994, are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . .$ 264
1996 . . . . . . . . . . . . . . . . . . . . . . 267
1997 . . . . . . . . . . . . . . . . . . . . . . 260
1998 . . . . . . . . . . . . . . . . . . . . . . 245
1999 and thereafter. . . . . . . . . . . . . . . 147
</TABLE>
NOTE D
-------------------------------------------------------------------------------
INCOME TAXES
Deferred income taxes reflect the impact of "temporary differences" between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations.
The components of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DEC. 31, DEC. 25, DEC. 26,
(IN THOUSANDS) 1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 891 $(11,661) $ 2,835
Foreign (141) (487) 409
-----------------------------------------------------------------
Income (loss) before
income taxes $ 750 $(12,148) $ 3,244
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
Income taxes consist of the following:
<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DEC. 31, DEC. 25, DEC. 26,
(IN THOUSANDS) 1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C>
Federal
Current $ 808 $ (1,079) $ 1,743
Deferred (530) (2,663) (1,024)
State
Current 635 -- 954
Deferred (563) (957) (569)
Foreign
Current (50) 542 46
Deferred -- (713) 110
-----------------------------------------------------------------
Provision (credit)
for income taxes $ 300 $ (4,870) $ 1,260
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
10
<PAGE>
Deferred income taxes arise from the following:
<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DEC. 31, DEC. 25, DEC. 26,
(IN THOUSANDS) 1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C>
Operating method $(3,498) $ (4,277) $ (2,537)
Alternative minimum
tax credit 2,147 -- 1,179
Other 258 (56) (125)
-----------------------------------------------------------------
$(1,093) $ (4,333) $ (1,483)
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
A reconciliation of the statutory federal income tax rate and the effective tax
rate as a percentage of pre tax income for each year is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0%
State and franchise
taxes net of US federal
income tax benefit 5.2 5.2 8.0
Income not subject
to income tax -- -- (4.9)
Other .8 .8 1.7
-----------------------------------------------------------------
40.0% 40.0% 38.8%
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
The items which comprise a significant portion of deferred tax asset and
liabilities as of December 31, 1994, and December 25, 1993, are as follows:
<TABLE>
<CAPTION>
1994 1993
DEF. TAX DEF. TAX DEF. TAX
(IN THOUSANDS) LIABILITIES ASSET LIABILITIES
-------------------------------------------------------------------
<S> <C> <C> <C>
Operating methodd $ 6,122 $ 1,211 $ 8,726
State income tax accrual 1,273 -- 1,836
Alt. minimum tax credit (609) -- (2,710)
Other (1,247) (453) (1,220)
-------------------------------------------------------------------
Deferred income taxes $ 5,539 $ 758 $ 6,632
-------------------------------------------------------------------
-------------------------------------------------------------------
</TABLE>
At December 31, 1994, the Company had available alternative minimum tax credit
carry forward of $609,000. At December 31, 1994, consolidated retained earnings
included $387,000 of unremitted earnings net of cumulative foreign currency
translation adjustments from the Company's foreign subsidiary. In the event of
repatriation, the Company does not anticipate any significant additional income
taxes.
NOTE E
-------------------------------------------------------------------------------
SCHEDULED FUTURE RECEIPTS ON LEASES AND NOTES
Scheduled future receipts on leases and notes, excluding the residual value of
the equipment, are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . .$ 38,445
1996 . . . . . . . . . . . . . . . . . . . . 29,883
1997 . . . . . . . . . . . . . . . . . . . . 18,527
1998 . . . . . . . . . . . . . . . . . . . . 10,204
1999 and thereafter. . . . . . . . . . . . . 6,472
</TABLE>
NOTE F
-------------------------------------------------------------------------------
STOCK OPTIONS AND STOCK PURCHASE PLANS
The Company has outstanding options under three stock option plans: its Key
Employee Stock Option Plan, dated March 23, 1983, as amended April 26, 1984 (the
"1983 Plan") pursuant to which 220,000 shares are reserved; its Stock Option
Plan, dated March 5, 1986 (the "1986 Plan") pursuant to which 500,000 shares are
reserved; and its 1994 stock plan dated March 23, 1994 (the "1994 Plan")
pursuant to which 200,000 shares are reserved. The 1983 Plan expired on March
23, 1993.
All Plans provide that the option price, the option term and the terms and
conditions upon which the options may be exercised, including the dates on which
they may be exercised, will be determined by the Company's Board of Directors
with respect to each option at the time it is granted. Options granted under the
1983 Plan are either incentive stock options or non-qualified options and were
granted at no less than 85% of the fair market value of the Common Stock on the
date of grant. Options outstanding under the 1983 Plan to purchase 69,750 shares
were exercisable as of December 31, 1994. Officers and directors of the Company
and its subsidiaries are eligible to participate under the 1986 Plan. Only
non-qualified stock options may be granted under the 1986 Plan. Options
outstanding under the 1986 Plan to purchase 178,000 shares of Common Stock are
exercisable. A total of 155,000 shares of Common Stock were available for the
grant of options under the 1986 Plan at December 31, 1994. Key employees and
directors of, and consultants to, the Company are eligible to participate in the
1994 Plan. Only non-qualified options may be granted under the 1994 Plan, and
the option exercise price may not be less than 50% of the fair market value of
the Common Stock on the date of grant. Options outstanding under the 1994 Plan
to purchase 21,000 shares of Common Stock are currently exercisable, and a total
of 10,000 shares remained available for grant under the plan at December 31,
1994.
An aggregate of 182,500 shares of Common Stock were originally reserved for
issuance pursuant to the Company's 1986 Employee Stock Purchase Plan, dated
September 11, 1986 and effective as of January 5, 1987 (the "Stock Purchase
Plan"). Available shares are reduced by options granted under the 1983 Plan
after the effective date of the Stock Purchase Plan.
11
<PAGE>
Under the Stock Purchase Plan, eligible employees have the right to acquire,
through authorized payroll deductions, shares of common stock. The Stock
Purchase Plan provides that an employee may elect to acquire stock twice each
year, on the first day of a six-month payment period, with the actual purchase
to take place on the last business day of each such payment period at a purchase
price of the lesser of 85% of the fair market value of the shares on the
election date or on the purchase date. The maximum number of shares that an
eligible participant will be allowed to purchase in any given period will be
equal to the number of whole shares equal in value to ten percent (10%) of the
employee's compensation divided by the purchase price. The Plan will remain in
effect until the earlier of the date that all or substantially all of the
unissued shares of common stock reserved under the Plan have been purchased or
the date that the Plan is terminated by the Board of Directors.
At December 31, 1994, employees had elected to acquire 317 shares of Common
Stock which were subsequently purchased on January 1, 1995. During 1994 and
1993, 824 and 894 shares, respectively, were issued under the Stock Purchase
Plan.
The following table summarizes 1994 and 1993 activity under the Stock Option
Plans and the Stock Purchase Plan:
<TABLE>
<CAPTION>
1983 STOCK 1986 1994
OPTION PURCHASE OPTION OPTION
PLAN PLAN PLAN PLAN
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares available
at Dec. 26, 1992 -- 70,448 500,000 --
Options granted in 1993:
Price $2.625 -- -- 240,000 --
Price $3.25 21,875 -- 135,000 --
Price $3.75 -- -- 30,000 --
Shares purchased in 1993 -- 894 -- --
Options canceled in 1993 -- -- (60,000) --
1983 Plan expired
Mar. 23, 1993,
remaining options (48,259) -- -- --
1994 Stock Plan Shares
available Mar. 29, 1994 -- -- -- 200,000
Options granted in 1994
Price $3.375 -- -- -- 10,000
Price $3.5625 -- -- -- 80,000
Price $3.625 -- -- -- 10,000
Price $3.75 -- -- -- 50,000
Price $4.00 -- -- -- 55,000
Shares purchased in 1994 -- 824 -- --
Options canceled
in 1994 (25,000) -- -- (15,000)
Options outstanding
at Dec. 31, 1994 101,875 -- 345,000 190,000
Shares available
at Dec. 31, 1994 -- 71,855 155,000 10,000
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
NOTE G
-------------------------------------------------------------------------------
TRANSACTIONS BETWEEN AFFILIATED COMPANIES
Until Healthco filed for bankruptcy on June 9, 1993, Healthco provided certain
sales and related services to the Company. The cost to the Company of such
services was approximately $267,000 and $843,000 in 1993 and 1992, respectively.
In addition, Healthco provided certain management, data processing, and
administrative services to the Company. The cost of these services was $129,000
and $239,000 in 1993 and 1992, respectively.
The Company leased its office space from Healthco until August 9, 1993. Rental
expense, including real estate taxes, in connection with this lease was $48,000
and $156,000 in 1993 and 1992, respectively.
The Company leased certain equipment to Healthco, which is also accounted for as
direct financing leases. The amount due from Healthco was $1,051,000 at December
25, 1993. Payments received in connection with these leases were $680,000 in
1993.
Until mid-1993, the Company purchased from Healthco substantially all of the
dental equipment which it leased to its customers. Such purchases were
$6,603,000 and $20,657,000 in 1993 and 1992, respectively. The Company also
financed Healthco's customers through conditional sale agreements in the amount
of $2,890,000 and $4,887,000 in 1993 and 1992, respectively. The amount payable
to Healthco was $1,925,000 at year-end 1993. In addition, Healthco from time to
time purchased repossessed dental equipment from the Company.
Healthco is currently being liquidated pursuant to a proceeding under Chapter 7
of the United States Bankruptcy Code. Healthco is no longer providing services,
leasing equipment or office space or selling equipment to the Company under the
arrangements describe above.
As described in Note A, certain Healthco Secured Creditors and the Company have
entered into releases covering claims which may arise out of the Healthco
bankruptcy. Accordingly, there are no balances in payables or receivables
between the Company and Healthco as of December 31, 1994.
The Company provided an elective employee saving plan for all eligible employees
through its participation in the Healthco Retirement Savings Plan, which
qualified as a thrift plan under Section 401(k) of the Internal Revenue Code.
The Company's participation in this Plan was terminated July 1, 1993. The costs
to the Company relating to the Plan were $6,059 in 1993. As described under
"Employee Benefit Plans" the Company has established a Savings Plan for its
employees.
12
<PAGE>
NOTE H
-------------------------------------------------------------------------------
EMPLOYEE BENEFIT PLANS
In December 1993, the Company established a stock bonus type of Employee Stock
Ownership Plan ("ESOP") for the benefit of all eligible employees. The ESOP is
expected to be primarily invested in common stock of the Company on behalf of
the employees. The Company made contributions of $99,000 in 1994 for the 1993
allocation to the ESOP.
Employees with five or more years of service with the Company from and after
December 1993 at the time of termination of employment will be fully vested in
their benefits under the ESOP. For a participant with fewer than five years of
service from December 1993 through his or her termination date, his or her
account balance will vest at the rate of 20% for each year of employment. Upon
the retirement or other termination of an ESOP participant, the shares of common
stock in which he or she is vested, at the option of the participant, may be
converted to cash or may be distributed. The unvested shares are allocated to
the remaining participants on a rational basis. The Company has issued 300,000
shares of Common Stock to this plan in consideration of a Promissory Note in the
principal amount of $1,050,000; 28,280 shares of Common Stock were allocated to
participant accounts for 1993 under the ESOP. No allocation has yet been made
for 1994.
In July 1994, the Company adopted a Supplemental Employee Stock Ownership Plan
("SESOP") for the benefit of all eligible employees. Eligibility requirements
are similar to the ESOP discussed above except that any amounts allocated under
the SESOP would first be allocated to the accounts of certain highly compensated
employees to make up for certain limitations on Company contributions under the
ESOP required by the 1993 Tax Act and next to all eligible employees on a
non-discriminatory basis. The Company has issued 350,000 shares of Common Stock
to this plan in consideration for a Promissory Note in the principal amount of
$1,225,000. No allocations have yet been made to participant accounts for 1994.
In July 1993, the Company established a Savings Plan for its employees, which
allows participants to make contributions by salary deductions pursuant to
Section 401(k) of the Internal Revenue Code. The Company matches employee
contributions up to a maximum of 2% of the employee's salary. Both employee and
employer contributions are vested immediately. The Company's contributions to
the Savings Plan were $ 37,975 in 1994, and $5,263 in 1993.
NOTE I
-------------------------------------------------------------------------------
PREFERRED STOCK PURCHASE RIGHTS PLAN
Pursuant to a rights agreement between the Company and the First National Bank
of Boston, as rights agent, dated August 3, 1993, the Board of Directors
declared a dividend on August 3, 1993 of one preferred stock purchase right
("Right") for each share of the Company's common stock (the "Shares")
outstanding on or after August 13, 1993. The Right entitles the holder to
purchase one one-hundredth of a share of Series A Preferred Stock, which
fractional share is substantially equivalent to one share of Common Stock, at an
exercise price of $20.00. The Rights will not be exercisable or transferable
apart from the Common Stock until the earlier to occur of (i) 10 days following
a public announcement that a person or affiliated group has acquired 15 percent
or more of the outstanding Common Stock (such person or group, an "Acquiring
Person"), or (ii) 10 business days after an announcement or commencement of a
tender offer which would result in a person or group's becoming an Acquiring
Person, subject to certain exceptions. The Rights beneficially owned by the
Acquiring Person and its affiliates become null and void upon the Rights
becoming exercisable.
If a person becomes an Acquiring Person or certain other events occur, each
Right entitles the holder, other than the Acquiring Person, to purchase common
stock (or one one-hundredths of a share of Preferred Stock, in the discretion of
the Board of Directors) having a market value of two times the exercise price of
the Right. If the Company is acquired in a merger or other business combination,
each exercisable Right entitles the holder, other than the Acquiring Person, to
purchase Common Stock of the acquiring company having a market value of two
times the exercise price of the Right.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person of 50% or more of the outstanding Common Stock, the
Board of Directors may direct the Company to exchange the Rights held by any
person other than an Acquiring Person at an exchange ratio of one share of
Common Stock per Right. The Rights may be redeemed by the Company, subject to
approval of the Board of Directors, for one cent per Right in accordance with
the provisions of the Rights Plan. The Rights have no voting or dividend
privileges.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF HPSC, INC.:
We have audited the accompanying consolidated balance sheets of HPSC, Inc. as
of December 31, 1994 and December 25, 1993, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of HPSC, Inc. as of
December 31, 1994 and December 25, 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand, L.L.P.
Boston, Massachusetts
March 15, 1995
14
<PAGE>
MARKET INFORMATION
The table below sets forth the representative high and low bid prices for shares
of the Common Stock in the over the counter market as reported by NASDAQ
National Market System (Symbol: "HPSC") for the fiscal years 1994 and 1993:
<TABLE>
<CAPTION>
1994 Fiscal Year High Low 1993 Fiscal Year High Low
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Quarter. . . . . .$ 3 3/4 $ 3 1/4 First Quarter. . . . . $ 4 $ 3 1/8
Second Quarter . . . . .4 1/8 3 1/4 Second Quarter . . . . . 4 2
Third Quarter. . . . . .3 7/8 3 1/16 Third Quarter. . . . . . 3 1/2 2 5/8
Fourth Quarter . . . . .4 3 1/4 Fourth Quarter . . . . . 4 3 1/4
</TABLE>
The foregoing quotations represent prices between dealers, and do not include
retail markups, markdowns, or commissions.
HOLDERS
Approximate Number of Record Holders
Title of Class (as of February 28, 1995)
-------------------------------------------------------------------------------
Common Stock, par value $.01 per share 110 (1)
(1) Excluded from the number of stockholders of record are approximately 1,000
"nominee" or "street name" holders.
DIVIDENDS
The Company has never paid any dividends and anticipates that for the
foreseeable future its earnings will be retained for use in its business.
15
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED
----------------------------------------------------------------------
DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 28, DECEMBER 29,
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1994 1993 1992 1991 1990
INCOME STATEMENT DATA
<S> <C> <C> <C> <C> <C>
Revenues:
Earned Income on
Leases and Notes $ 12,319 $ 17,095 $ 21,734 $ 25,565 $ 27,677
Provision for Losses (754) (15,104) (4,307) (4,403) (4,400)
----------------------------------------------------------------------
Net Revenues $ 11,565 $ 1,991 17,427 $ 21,162 $ 23,277
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 450 (7,278) $ 1,984 $ 3,182 $ 4,327
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Income (Loss) per Share $ .09 (1.48) $ .40 $ .65 $ .88
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Shares Used to Compute
Earnings per Share 4,989,391 4,923,233 4,922,473 4,921,145 4,922,936
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AS AT
-----------------------------------------------------------------------
DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 28, DECEMBER 29,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and Cash Equivalents $ 419 16,600 $ 625 $ 4,323 $ 2,610
Restricted Cash 7,936 -- -- -- --
Lease Contracts Receivable
and Notes Receivable 103,531 126,369 184,928 217,304 235,842
Unearned Income 16,924 21,803 33,791 43,573 51,648
Total Assets 103,148 130,437 158,857 185,168 195,476
Bank Debt 16,500 7,130 24,584 33,593 27,345
Senior Debt 41,024 50,000 50,000 68,000 92,000
Subordinated Debt -- 19,962 19,090 18,326 17,679
Stockholders' Equity 32,822 37,621 45,041 43,385 40,216
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS
-------------------------------------------------------------------------------
FISCAL 1994 COMPARED TO 1993
The Company's net income of $450,000 or $0.09 per share in 1994 compared with a
loss of $7,278,000 or $1.48 per share in 1993. This increase was due principally
to a decrease in the provision for losses and interest expense, offset by a
decline in earned income on portfolio assets as well as a continuing increase in
selling, general and administrative costs as part of the Company's continuing
transition into an independent, "open-market" financial services company.
Revenue from leases and notes for 1994 was $12,319,000 compared to $17,095,000
in 1993. This decline of 28% resulted primarily from a reduction of average
portfolio assets from 1993 to 1994 of 26%. However, as the Company made the
transition to an independent, open-market financial services company in 1994, it
financed portfolio assets at a cost of $32,609,000 in 1994 compared to
$16,402,000 in 1993, an approximately 99% increase in the amount of assets
financed. At December 31, 1994, the Company had a $25,000,000 backlog,
consisting of customer applications which have been approved but have not yet
resulted in a completed transaction, compared to $6,400,000 at the end of 1993.
Not all approved applications will result in financing transactions for the
Company. The Company has reduced its cost of capital as a result of
securitization and revolving line of credit transactions (see Note B to
Financial Statements and Liquidity and Capital Resources). By reducing its cost
of capital, the Company has been able to maintain competitive rates which it
charges to its customers.
Selling, general and administrative expenses were $6,970,000 in 1994 compared to
$5,160,000 in 1993. As a result of the Healthco bankruptcy, the Company now
maintains services which were formerly provided by Healthco under intercompany
agreements between the two companies, including computer, tax compliance, human
resources and certain advertising services. After the Healthco bankruptcy the
Company hired additional senior management and sales and support personnel to
assist the Company in its transition to a financial services organization no
longer affiliated with a single vendor. In addition, as discussed above, the
Company's level of activity in financing portfolio assets increased
approximately 99% in 1994 over 1993. The Company has also incurred substantial
legal fees in connection with the Healthco bankruptcy and the transition of the
Company to an open market financial services organization.
The provision for losses was $754,000 in 1994 compared to $15,104,000 in 1993.
The allowance for losses of $4,595,000 for 1994 was approximately 5.0% of net
investment in leases and notes compared to $6,897,000 or 6.3% in 1993. Net
write-offs were $3,056,000 in 1994 compared to $17,423,000 in 1993. This 1994
amount includes approximately $1,166,000 of write-offs taken against the
portfolio of Credident Inc., the Company's wholly-owned Canadian subsidiary. In
June 1994, the Company entered into an agreement to sell substantially all the
finance assets of Credident to Newcourt Credit Group, Inc. ("Newcourt") for
approximately (US) $7,000,000 in cash. The Company entered into a service
agreement whereby Newcourt will manage certain accounts over the next two years.
Since the Company no longer generates new business in Canada, these managed
accounts were written down to estimated net realizable value.
The decrease in the provision for losses in 1994 is due in part to the decline
in portfolio size, the increase in the allowance for losses in 1993 (see
Management's Discussion and Analysis of Financial Condition Results of
Operations for 1993 regarding the Healthco bankruptcy), and management's
continuing analysis of the risks and diversification in its current portfolio of
assets. The exposure to certain accounts generated in the mid to late 1980's has
decreased significantly in the Company's portfolio to 7.7% at December 31, 1994.
This category of accounts represented a substantial portion of the 1993
provision for losses.
Net interest expense for 1994 was $3,845,000 compared to $8,979,000 in 1993.
This 57% decrease resulted from a reduced level of average borrowings (30%) as
well as reduced overall interest rates on outstanding debt. The Company funded
its business in 1994 in part with fixed rate and revolving credit arrangements.
The Company had income before income taxes in 1994 of $750,000 compared to a
loss of $12,148,000 in 1993. The provision for income taxes was $300,000 in 1994
compared to a credit in 1993 of $4,870,000.
Despite the adverse developments arising out of the Healthco bankruptcy in 1993,
the Company replaced the business previously supplied by Healthco with referrals
from other equipment vendors. The Company has established relationships with
dental, medical, and other healthcare equipment distributors representing
diversified sources of new business. All of the new financings entered into by
the Company in 1994 involved equipment vendors other than Healthco.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, the Company had $419,000 in cash and cash equivalents
compared with $16,600,000 at the end of 1993. As discussed in Note B to the
Company's consolidated financial statements $7,936,000 of cash was restricted as
of December 31, 1994, pursuant to the Securitization agreement with HPSCF
discussed below. Cash used in operating activities was $4,104,000 for the year
ended December 31, 1994 compared to cash provided by operating activities of
$1,583,000 in 1993. Cash provided by investing activities was $17,181,000 for
the 1994 year compared to $31,988,000 in 1993.
On December 27, 1993, the Company raised $70,000,000 through an asset
Securitization transaction in which a wholly-owned subsidiary, HPSC Funding
Corp. I ("HPSCF"), issued senior secured notes at a rate of 5.01%. The notes
were secured by a portion of the Company's portfolio which it sold in part and
contributed in part to HPSCF. Proceeds of this financing were used to retire
$50,000,000, 10.125% senior notes due December 28, 1993, and $20,000,000, 10%
subordinated notes due January 15, 1994.
17
<PAGE>
On June 23, 1994, the Company executed a $20,000,000 revolving credit agreement
with the First National Bank of Boston as Agent Bank ("Revolving Loan
Agreement"). Under this Agreement, the Company may acquire US dollar loans at
variable rates of prime plus 1/4% to 1/2% or Eurodollar loans at LIBOR plus
1.75% to 2.0%, dependent on certain performance covenants. At December 31, 1994,
the Company had $3,500,000 available under the Revolving Loan Agreement. This
Agreement expires at December 31, 1995. In February, 1995, this Agreement was
amended to increase availability to $25,000,000 until April 30, 1995.
Also, as of November 1, 1994, the Company entered into a Purchase and Sale
Agreement with the Healthco Secured Creditors pursuant to which the Company and
certain individual investors agreed to acquire the shares of the Company's stock
pledged to the Secured Creditors and to resolve all claims, which may arise out
of the Healthco bankruptcy, between the Company and the Secured Creditors. The
total consideration to be paid under the Purchase and Sale Agreement was $9
million, $4.5 million to be paid at closing and $4.5 million to be paid in the
form of a six-month promissory note, collateralized by the shares of HPSC Common
Stock purchased by the Company. On December 30, 1994, the Company and the
Secured Creditors closed the transaction provided for in the Purchase and Sale
Agreement. The Company acquired 1,225,182 shares of its Common Stock, subject to
the pledge of those shares to the Secured Creditors. Individual investors
acquired the remaining 724,000 shares. Mutual releases of claims were exchanged
at the closing; provided, that the release of the Secured Creditors' claims
against HPSC, if any, is contingent upon the Company's repayment in full of the
note.
As of January 31, 1995, the Company, along with its newly-formed, wholly-owned,
special-purpose subsidiary, HPSC Bravo Funding Corp. ("Bravo") completed a
$50,000,000 revolving credit facility structured and guaranteed by Capital
Markets Assurance Corporation ("CapMAC"). Under the terms of the facility,
Bravo, to which the Company has sold and may continue to sell or contribute
certain of its portfolio assets, pledges its interests in these assets to a
commercial-paper conduit entity. Bravo incurs interest at variable rates in the
commercial paper market and enters into interest rate swap agreements to assure
fixed rate funding.
Monthly settlements of principal and interest payments are made from the
collection of payments on Bravo's transactions. Additional sales to Bravo from
HPSC may be made subject to certain covenants regarding Bravo's portfolio
performance and borrowing base calculations.
The Company is the servicer of the Bravo portfolio, subject to meeting certain
covenants. The required monthly payments of principal and interest to purchasers
of the commercial paper are guaranteed by CapMAC pursuant to the terms of the
agreement.
Amortization of debt discount of $ 38,000, $872,000, and $763,000 in 1994, 1993,
and 1992, respectively, is included in interest expense. Deferred underwriting
expense of $975,000 (included in other assets) was amortized over a ten-year
term of the Subordinated Notes.
The Company's long-term debt, as shown on the accompanying balance sheet,
reflects its approximate fair market value. The fair market value is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same maturity.
In order to finance adequately its anticipated growth, the Company will continue
to seek to raise additional capital from bank and non-bank sources in 1995. The
Company expects that it will be able to obtain additional capital
at competitive rates, but there can be no assurance it will
be able to do so.
Inflation in the form of rising interest rates could have an adverse impact on
the interest rate margins of the Company and its ability to maintain timely and
adequate earning spreads on its portfolio assets.
RESULTS OF OPERATIONS
-------------------------------------------------------------------------------
FISCAL 1993 COMPARED TO 1992
The Company experienced a net loss of $7,278,000 or $1.48 per share in 1993
compared with net income of $1,984,000 or $.40 per share in 1992. In 1993 the
Company experienced a substantial decrease in new business, increased selling,
general and administrative costs and a substantial adjustment to its loan loss
reserves, in each case largely as a result of the bankruptcy of Healthco, which
previously had referred to the Company substantially all of the Company's
business. Healthco filed for bankruptcy on June 9, 1993 and subsequently
liquidated under Chapter 7 of the US Bankruptcy Code.
Revenue from leases and notes for 1993 was $17,095,000 compared to $21,734,000
in 1992. This decline resulted from the effects of the Healthco bankruptcy and
lower margins caused by declining interest rates. The 18% decline in revenue in
1993 resulted primarily from a reduction of average portfolio assets from 1992
to 1993 of 15%. The Company financed assets at a cost of $16,402,000 in 1993
compared to $30,625,000 in 1992. By reducing its cost of capital, the Company
was able to lower the rates which it charged to its customers, thereby becoming
more competitive while at the same time maintaining its margins on its
financings.
Selling, general and administrative expenses were $5,160,000 in 1993 compared to
$3,574,000 in 1992. As a result of the Healthco bankruptcy, the Company had to
replace services which were formerly provided by Healthco under intercompany
agreements between the two companies, including computer, tax compliance, human
resources and certain advertising services. After the Healthco bankruptcy the
Company hired additional senior management and sales and support personnel to
assist the Company in its transition to a financial services organization no
longer affiliated with a single vendor. The Company also incurred substantial
legal fees in connection with the Healthco bankruptcy and the transition of the
Company to an open market financial services organization.
18
<PAGE>
The provision for losses was $15,104,000 in 1993 compared to $4,307,000 in 1992.
The allowance for losses of $6,897,000 for 1993 was approximately 6.3% of net
investment in leases and notes compared to $9,216,000 or 5.9% in 1992. Net
write-offs were $17,423,000 in 1993 compared to $6,124,000 in 1992. Delinquent
installments amounted to $4,805,000 at December 25, 1993, compared to $9,917,000
at December 26, 1992. The Company continued to review credit guidelines in 1993
to adjust them as necessary to reflect current market and economic conditions.
After the Healthco bankruptcy the Company carefully reviewed its existing loan
loss reserves to ascertain the effects on its portfolio of the Healthco
bankruptcy, a prolonged recession and recent tax increases. Based upon this
review, management decided to increase substantially the Company's loan loss
reserves from previous levels. This increase did not result from existing credit
policies or collection procedures. A substantial portion of the additional loan
loss reserves was taken on accounts generated in the mid to late 1980s. These
accounts were previously reserved for in part but required additional reserves
because the underlying value of Healthco equipment collateral had diminished
substantially. Despite the Company's efforts to collect many of these accounts
through aggressive and persistent collection litigation, the combination of
reduced equipment value and the obligors' diminished ability to pay resulting
from the prolonged recession made additional reserves necessary.
Net interest expense for 1993 was $8,979,000 compared to $10,609,000 in 1992.
This decrease resulted from a reduced level of borrowings as well as reduced
interest rates on outstanding debt. The overall debt level was reduced by
approximately $17,000,000 compared to the prior year. The decline in interest
expense of 15% resulted primarily from a reduction in average debt from 1992 to
1993 of 20%. The Company funded its business in 1993 in part with a revolving
credit arrangement, thereby taking advantage of more favorable finance rates of
approximately 4.75% in 1993 compared to 5.0% in 1992.
The Company had a loss before income taxes in 1993 of $12,148,000 compared to
income of $3,244,000 in 1992. The provision for income taxes was a credit in
1993 of $4,870,000 compared to a provision of $1,260,000 in 1992.
Despite the adverse developments arising out of the Healthco bankruptcy, the
Company began in 1993 to replace the business previously supplied by Healthco
with referrals from other equipment vendors. The Company established
relationships with several dental, healthcare and other equipment distributors
representing diversified sources of new business. Substantially all of the new
financings entered into by the Company in the last half of 1993 involved
equipment vendors other than Healthco.
19
<PAGE>
OFFICERS
JOHN W. EVERETS
Chairman
Chief Executive Officer
RAYMOND R. DOHERTY
President
Chief Operating Officer
RENE LEFEBVRE
Vice President
Treasurer
Chief Financial Officer
DIRECTORS
John W. Everets
Chairman
Chief Executive Officer
RAYMOND R. DOHERTY
President
Chief Operating Officer
LOUIS J.P. CALISTI, DDS MPH
Senior Vice President
JOSEPH A. BIERNAT (2)
Retired
Former Senior Vice President
United Technologies Corp.
J. KERMIT BIRCHFIELD, JR. (1)
Independent Consultant
DOLLIE COLE (1) (2)
Chairperson
Dollie Cole Corporation
Dallas, Texas
SAMUEL P. COOLEY (1) (2)
Retired
Former Executive Vice President
Shawmut National Corp.
THOMAS M. MCDOUGAL, DDS (2)
Practicing Dentist
AUDITORS
Coopers & Lybrand, L.L.P.
One International Place
Boston, Massachusetts 02110
TRANSFER AGENT
First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
10-K
HPSC's Annual Report on Form 10-K is available to stockholders without charge by
writing to:
Investor Relations Department
HPSC, Inc.
Sixty State Street, Suite 3520
Boston, Massachusetts 02109
(1) Member, Compensation Committee
(2) Member, Audit Committee
20
<PAGE>
HPSC
Sixty State Street
Boston, Massachusetts 02109
Tel 800-225-2488 | Fax 800-526-0259
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF HPSC, INC.
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
Credident, Inc. Canada
American Commercial Finance Corporation Delaware
HPSC Funding Corp. I Delaware
HPSC Bravo Funding Corp. Delaware
<PAGE>
EXHIBIT 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the registration
statements of HPSC, Inc. on Form S-8 (File Nos. 33-10796 and 33-6075) of our
reports dated March 15, 1995, on our audits of the consolidated financial
statements and financial statement schedule of HPSC, Inc. as of December 31,
1994 and December 25, 1993 and for each of the three years in the period ended
December 31, 1994, which reports are included or incorporated by reference in
this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 24, 1995
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